RTX stock price target raised to $154 from $136 at Bernstein

Bernstein SocGen Group raised its price target for RTX Corp. to $154, maintaining a Market Perform rating, citing robust demand within its defense segment, particularly for missile and missile defense systems, and an improved margin outlook for Collins Aerospace. While the firm lowered 2025 free cash flow estimates due to ongoing Pratt & Whitney GTF engine issues, the increased price target reflects RTX's overall strong revenue growth, a higher EV/EBITDA multiple, and significant recent U.S. Department of Defense contract awards to its Raytheon division, highlighting the company's sustained strength in the aerospace and defense sector.

Analysis

Bernstein SocGen Group has raised its price target for RTX Corp. to $154.00, though it maintains a Market Perform rating, signaling a nuanced outlook. The positive revision is largely driven by the strength of RTX's defense segment, which is benefiting from favorable geopolitical tailwinds and government spending. This is substantiated by a robust Q1 backlog-to-last-twelve-months sales ratio of 2.31x in its missile businesses and a series of significant new contracts awarded to its Raytheon division, including a $279.2 million award for the Land-Based Phalanx Weapon System. Further optimism stems from the Collins Aerospace segment, where improving production ramps at Boeing and Airbus are expected to provide operating leverage and drive margin improvement. However, these strengths are counterbalanced by significant challenges in the Pratt & Whitney division, where over 610 aircraft remain grounded due to GTF engine issues. This problem has led Bernstein to lower its 2025 free cash flow estimate for RTX to $6.9 billion. Despite this, Bernstein increased its target EV/EBITDA multiple for RTX to 16.6x, reflecting a higher valuation for the defense business that partially offsets the commercial engine risks.

Key Decisions for Investors

• Investors should weigh the strong, sustained demand in RTX's defense portfolio, confirmed by a high backlog ratio and new contracts, against the significant financial drag and operational uncertainty from the ongoing Pratt & Whitney engine issues.
• Monitor progress on reducing the number of grounded aircraft and improving engine shop throughput in the second half of the year, as management's ability to meet these targets is critical to validating the company's free cash flow outlook.
• Given the stock is trading near its 52-week high and the new $154 price target suggests modest upside, the Market Perform rating implies a hold for existing investors, while new capital might be better deployed on a pullback or upon clear evidence of a turnaround at Pratt & Whitney.