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On Monday, UBS analyst Gavin Parsons (NYSE:PSN) upgraded RTX Corp. (NYSE:RTX) stock from Neutral to Buy, adjusting the price target to $147.00, up from the previous $142.00. As a prominent player in the Aerospace & Defense industry with a market capitalization of $164 billion, RTX has demonstrated its market strength. According to InvestingPro data, the company’s stock is currently trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.58. Parsons highlighted the company’s strong positioning at the crossroads of commercial original equipment (OE) and aftermarket strength, coupled with robust international defense demand, which constitutes 44% of Raytheon (NYSE:RTN)’s backlog.
The upgrade is based on the belief that RTX Corp. has specific drivers that could lead to outperforming market consensus estimates. The company has shown strong momentum with revenue growth of 17.15% over the last twelve months, reaching $80.7 billion. UBS’s projections are notably higher than consensus, with an expectation of a 5% increase in earnings per share (EPS) in 2026 and an 11% increase in 2027. These figures are based on the firm’s analysis and forecasts for the company’s growth and profitability, supported by RTX’s impressive track record of maintaining dividend payments for 55 consecutive years.
Parsons further detailed that potential increases in NATO defense spending could significantly boost Raytheon’s revenues. If NATO members were to allocate 3%, 4%, or 5% of their GDP to defense spending, this could result in an upside potential of 3%, 12%, or 20%, respectively, to Raytheon’s consensus revenue by 2029.
Additionally, UBS’s analysis of RTX Corp.’s defense exposure suggests substantial revenue opportunities. The firm’s detailed margin builds for Collins Aerospace and Pratt & Whitney indicate the potential for over 30% incremental margins. Furthermore, data from the UBS Evidence Lab Flight Hour Tracker reveals that Pratt & Whitney’s GTF engine has exceeded its previous peak monthly hours flown, while the V2500 engine’s performance remains stable, underscoring the company’s robust position in the aerospace sector.
In other recent news, RTX Corp reported its fourth-quarter 2024 earnings, surpassing analysts’ expectations with an adjusted earnings per share (EPS) of $1.54, compared to the forecasted $1.38. The company’s revenue also exceeded predictions, reaching $21.62 billion against an expected $20.53 billion, highlighting significant growth in its aerospace and defense sectors. Pratt & Whitney, a division of RTX, secured a $1.5 billion contract with the U.S. Air Force to support F119 engines, emphasizing the company’s ongoing commitment to enhancing military capabilities. In addition, Raytheon, another RTX business unit, successfully completed tests for the U.S. Army’s Next-Generation Short-Range Interceptor program, marking a step forward in air defense technology.
The company’s backlog increased by 11% year-over-year, reaching $218 billion, indicating strong demand for its products. For 2025, RTX projects adjusted sales of $83-$84 billion, reflecting an anticipated organic growth of 4-6%. The firm expects to see segment profit growth of 10-13% and adjusted EPS in the range of $6.00-$6.15. Meanwhile, the defense sector faces potential challenges as reports suggest the Pentagon is preparing for significant budget cuts, which could impact future revenue streams for defense contractors like RTX. Despite these developments, RTX remains focused on productivity and operational efficiency to sustain growth.
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