The FY2026 defense appropriations agreement includes more than $6.3 billion for 13 critical munitions and provides conditional multiyear procurement authority for eight of those programs. This offers encouraging prospects to major defense contractors such as RTX Corp. (NYSE:RTX), which has been penning down some large-scale contracts to support the government’s defense spending.
RTX’s manufacturing expansion supports its record backlog, but is RTX Corporation (RTX) still a buy with much of that growth already priced in?
Why Pentagon’s Munitions Funding Matters
RTX has expanded its business pipeline through government-backed agreements. These involve scaling up production for various programs such as AMRAAM air-to-air missiles, the Standard Missiles, and Tomahawk cruise missiles. It resulted in a notable jump in the company’s order backlog, which stood at a record $289 billion by the end of second quarter fiscal 2026.
Additionally, the management has decided to spend $25 million for the expansion of its Niepołomice site in Poland, which delivers tubular assemblies for commercial and military engines. This bolsters the company’s manufacturing footprint in Europe, with operating leverage potential in the future. The investment plan follows a $100 million capital outlay revealed back in April, to enhance production at the Rzeszów facility.
Government Spending Bill Comes With Fresh Tailwinds
A growing backlog and investments across production facilities in Europe carry long-term prospects. Hence, there would be limited short-term impact on backlog conversion or topline growth. The company’s impressive $289 billion backlog is still subject to conversion, which can face several headwinds. These include supply chain bottlenecks, delays in production and delivery timelines, and cyclicality across the broader commercial aerospace segment.
The commercial aerospace business, including Pratt & Whitney and Collins Aerospace, depends on airline demand and aircraft production rates, which can swing with economic conditions. Product quality issues, such as the powder metal defect affecting Pratt & Whitney’s geared turbofan engines, have led to costly inspections and customer compensation.
Solid Operations, Premium Price Tag
The stock has lately delivered a steady performance rather than being highly spectacular, and it seems as if investors are willing to pay a premium for this quality name that still hasn’t been rewarded by the market in 2026. This aerospace and defense giant had a market capitalization of about $249.3 billion after closing at $185.01 on October 1.
By no means is RTX cheap, as the stock trades at a trailing P/E multiple of 33.62x. However, the forward P/E of 24.57 implies that analysts project earnings to expand going forward, which would bring the multiple down considerably if forecasts are met.
Institutional Sentiment
Data tracked across 1,000+ hedge funds by Insider Monkey still shows significant amount of institutional interest in the stock. This is despite a slight dip in the number of hedge funds holding positions. As per 13F filings, hedge fund ownership declined from 95 funds in Q1 2026 to 92 funds in the following quarter. Short interest remains below 1%, suggesting very nominal amount of active bets against the stock.
BlackRock is the largest institutional stakeholder in the company, as per Yahoo Finance database, holding 110.53 million shares. This translates into 8.20% ownership in the company. Other notable stakeholders include State Street Corporation and Vanguard Capital Management with 7.08% and 6.53% ownerships, respectively.
What Lies Ahead
RTX continues to play an integral role across various missile-defense systems. With its record order backlog, the broader sentiment now rests on delivery of the planned production ramp. Capital investments on capacity expansion are expected to keep margins under pressure for the foreseeable future, but do carry long-term potential.
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