RTX — RTX Corporation

The market is leaning positive after the 2026-10-20 Q3 print: sales of $25.0B rose 11% YoY, adjusted EPS of $2.26 beat consensus by roughly 27%, and management lifted FY26 adjusted EPS guidance to $7.65–$7.75. A record $340B backlog and the $20.7B AMRAAM award support the bullish tone, though as of 2026-10-20 the stock remained below its 50- and 200-day averages and lingering GTF/DOJ/SEC issues kept enthusiasm in check.

The three-year quarterly trend is one of clear acceleration, not a one-quarter blip. Revenue grew from $19.9B in Q4 2023 to $24.97B in Q3 2026, with YoY growth stepping up from +5.2% in Q1 2025 to +11.1% in Q3 2026 (Q2 2026 was +14.5%). Operating margin expanded from roughly 9–10% in 2024 and early 2025 to 13.4% in Q3 2026; Q2 2024's 2.7% margin was a one-off charge, not the underlying trend. Diluted EPS rose from $1.05 in Q4 2023 to $1.89 in Q3 2026, though Q3 2026 included a roughly $0.25 IEEPA cost-recovery benefit, so underlying EPS is strong but not quite as explosive as the adjusted 27% beat suggests. TTM free cash flow of about $9.2B is consistent with the $9.0–9.2B FY26 guidance; quarterly working-capital swings explain the noise.

As of 2026-10-20, the $194.61 price is about 31.2x trailing EPS, with a PEG of 1.185 and a forward P/E of roughly 25.3x on the FY26 adjusted EPS guidance midpoint of $7.70—below the 5-year average P/E of 33.7x. But P/S is 2.73x versus a 5-year average of 2.13x, and P/B is 3.8x, so the stock is not cheap on sales or book value. Net: fair-to-modestly-rich, with the P/E discount to history explained partly by low ROIC of 6.5% and regulatory overhang.

At $194.61, the market is valuing RTX at roughly 25x FY26 adjusted EPS, not the 31x trailing number, and it is assigning limited credit for the record $340B backlog or the raised $7.65–$7.75 EPS guidance. If 2027 earnings grow and free cash flow lands at $9.0–9.2B, the stock can grind toward the $231 consensus target; if the IEEPA recovery and customer-bankruptcy charge are treated as noisy one-offs, the real debate is whether commercial aftermarket and defense volumes can keep margins above 13%. That makes the setup more 'prove the backlog converts' than 'priced for perfection.'

As of 2026-10-20, RSI(14) was 54.4—neutral, not overbought. The stock was 3.23% above its 20-day average but 2.93% below its 50-day and 1.05% below its 200-day; one-week return was +5.49%, while one-month was -0.48% and three-month -0.31%. That is a post-earnings bounce inside a sideways/range-bound tape, not a confirmed uptrend. Entry-timing implication: no technical urgency; a reclaim of the 50/200-day averages would improve the setup, while failure near the mid-$190s keeps it range-bound.

• Geopolitical tensions and elevated global defense budgets are a direct tailwind for Raytheon munitions, missile defense and radar programs, supporting the $164B defense backlog.
• Resilient commercial air traffic supports Collins and Pratt & Whitney aftermarket/OE demand, but the recovery is constrained by engine overhaul capacity and GTF inspection requirements.
• Supply-chain bottlenecks, skilled-labor shortages and raw-material inflation can limit manufacturing throughput and pressure margins despite strong order books.
• US defense budget and continuing-resolution risk, plus government contract timing, can delay awards and cash conversion even when demand is strong.
• Regulatory and legal scrutiny, including DOJ/SEC inquiries and GTF powder-metal inspections, remains a sector-specific overhang that can trigger charges or certification delays.

• Q4/FY26 results on 2027-01-26 (estimated) and 2027 guidance; confirmation that the third FY26 raise is conservative.
• Execution on the record $340B backlog, including the $20.7B AMRAAM award, Tomahawk scaling above 1,000 units annually, and European component-line buildouts.
• Resolution or updates on Pratt & Whitney GTF powder-metal inspection mandates and the DOJ/SEC investigations.
• Additional NATO and allied restocking orders, plus US defense supplemental funding tied to geopolitical tensions.
• Commercial aftermarket growth and OE delivery recovery at Collins and Pratt & Whitney.

• Supply-chain and labor constraints, plus raw-material inflation, could prevent RTX from converting backlog into revenue and margin as fast as expected.
• Pratt & Whitney GTF powder-metal inspections and related customer compensation or groundings remain a multi-year cost and reputational risk; the $363M customer-bankruptcy charge shows program friction is real.
• DOJ/SEC inquiries could result in penalties, remediation costs or management distraction.
• Valuation risk: P/S of 2.73x is above the 5-year average of 2.13x, and the stock is not cheap if growth decelerates or one-off IEEPA benefits fade.
• Defense budget and continuing-resolution risk, along with contract timing, could create lumpy orders and cash flow.

RTX is a high-quality aerospace and defense franchise with accelerating revenue, expanding margins, a record $340B backlog and raised guidance, but at $194.61 it is fairly valued rather than cheap. The Q3 beat was real, yet part of the EPS boost was one-off and GTF/regulatory risks are unresolved. The risk/reward is balanced: a solid long-term compounder, but not a compelling immediate bargain.

I applied a 27.3x P/E to the FY2026 adjusted EPS guidance midpoint of $7.70 (27.3 × 7.70 = $210.21), a discount to the 5-year average P/E of 33.7x but a premium to the current ~25x forward multiple, justified by 11% organic growth, record backlog and expanding margins. Cross-checking EV/EBITDA at roughly 19x on about $16.5B forward EBITDA also supports a ~$200–215 equity value per share.