RTX Is a Defensive Stock With Room to Grow

RTX's stock has surged nearly 45% year-to-date, outperforming major indices, driven by escalating geopolitical tensions and strong Q2 2025 results, which saw revenue increase 9% to $21.6 billion and adjusted EPS rise 11% to $1.56. The company's total contract backlog grew 15% to $236 billion, with the defense segment backlog expanding 20% year-over-year, outpacing commercial growth and signaling potential future defense-led expansion. Despite a forward P/E of 24.6x, the article suggests sustained growth and an 8% increased dividend, offering a 1.67% yield, could provide steady returns and defensive stability amid broader market uncertainty.

Analysis

RTX Corporation has demonstrated significant market outperformance, with its stock price appreciating nearly 45% year-to-date, surpassing both the S&P 500 and key technology stocks. This rally is underpinned by two primary catalysts: heightened geopolitical tensions that began driving the stock up in June, and a strong Q2 2025 earnings report. The company reported an acceleration in growth, with Q2 revenue rising 9% year-over-year to $21.6 billion and adjusted EPS increasing 11% to $1.56, an improvement from the 5% revenue and 10% EPS growth seen in Q1. While recent performance was driven by the commercial aerospace segment, a forward-looking analysis of the company's backlog suggests a potential shift. As of June 30, 2025, RTX's total contract backlog stood at $236 billion, a 15% year-over-year increase. Critically, the defense backlog grew 20% to $92 billion, outpacing the 11.6% growth in the commercial backlog. This robust defense order book, evidenced by a recent $1.7 billion U.S. Army contract, indicates that future growth may be led by its core defense business, providing a potential hedge against any slowdown in commercial aviation. Despite a premium valuation of 24.6 times forward earnings compared to peers like Lockheed Martin at 16.8x, the combination of a strong growth narrative, defensive business stability, and an 8% dividend increase providing a 1.67% forward yield, supports the case for sustained performance.

Key Decisions for Investors

• Given the accelerating revenue growth and a 15% year-over-year increase in the total contract backlog, investors might consider the stock's growth trajectory, which could justify its current valuation premium.
• Investors should closely monitor the forward P/E ratio of 24.6x, as continued earnings execution is crucial to support the significant valuation gap relative to defense-sector peers such as Lockheed Martin.
• The rapid 20% growth in the defense backlog signals a potential shift in growth drivers; therefore, upcoming earnings reports should be scrutinized for evidence of this backlog converting into accelerated revenue for the defense segment.
• For portfolios concerned with market volatility, RTX's combination of a defensive earnings base, a recently increased dividend yielding 1.67%, and a strong growth outlook presents a case for stable total returns amid broader economic uncertainty.