RTX Corporation (NYSE:RTX) is increasingly capitalizing on strong demand for aircraft replacement parts, repairs, and avionics upgrades. Higher production volumes for narrow-body and wide-body aircraft, along with demand for new engines, also support its long-term prospects. RTX recently made it to our list of best aerospace dividend stocks to buy. Find out which other stocks made the list.
While the stock is down about 1% for the year, it is much better than the S&P 500 aerospace and defense sector’s 9% loss. The relative strength reflects investor confidence in increasing demand for aftermarket services and equipment.
Commercial Aerospace Business Drives Growth
The Pratt & Whitney segment, which manufactures commercial and military aircraft engines, posted 16% sales growth in the second quarter to $8.89 billion, with adjusted profit up 22% and an operating margin of 8.3%. The performance highlights the company’s ability to capitalize on demand for aircraft engines and related maintenance services. It has already announced a $25 million investment plan to expand manufacturing in Poland in response to the growth.
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Collins Aerospace, which supplies avionics, flight controls, and aircraft interiors, achieved 8% sales growth as profit grew 10% and operating margin totaled 16.7%.
The impressive results suggest the company’s growth is no longer solely dependent on new aircraft deliveries. Instead, maintenance repairs and replacement parts have emerged as key growth drivers.
Following its October 20 third-quarter results, RTX raised its 2026 adjusted sales guidance to $97 billion–$97.5 billion and adjusted EPS outlook to $7.65–$7.75, with organic sales growth expected at 10%–11%.
RTX’s strong performance across engine manufacturing and aftermarket services highlights the importance of scale, recurring revenue, and operational execution in the aerospace industry. Investors comparing opportunities in this space may also want to weigh its growth prospects and valuation against those of GE Aerospace (GE) vs. RTX (RTX): Which Is the Better Stock to Buy? for a closer comparison.
Is Valuation a Concern?
Despite the impressive performance, RTX stock has pulled back significantly, down about 37% a share from all-time highs. Nevertheless, the correction has come amid concerns that the stock is trading at a significant premium, even though it is backed by a large order backlog of over $200 billion.
At a price-to-earnings multiple of 33x, it trades well above the sector median of 20x. The stock also trades at a much higher sales multiple, with a price-to-sales ratio of 2.78x compared to the sector average of 1.77x.
These elevated multiples indicate that investors are paying a substantial premium for RTX’s business quality, growth prospects, and relatively resilient revenue streams. The company’s order backlog of more than $200 billion provides meaningful visibility into future demand, but converting that backlog into profitable sales and free cash flow remains essential.
Improving Free Cash Flow
RTX Corporation has already shown it can generate cash, with free cash flow rising to $2.88 billion in the second quarter, up from negative $72 million in the same quarter last year. Cash flow for the first half of the year also improved to $4.18 billion from $720 million a year ago.
Strong cash reserves underscore why the company distributes nearly half of its earnings as dividends. With a dividend yield of about 1.56%, the stock suits investors seeking dividend income and long-term growth, given its long payout record.
Its quarterly payout has increased from $0.63 a share in early last year to $0.73 a share, translating to an annual rate of $2.92 a share. Strong demand for commercial aircraft engines and aftermarket services ensures the company generates significant recurring cash flow to sustain the payouts.
Hedge Fund Positioning
Meanwhile, institutional positioning around the stock remains constructive, though the number of hedge funds holding stakes dropped to 92 in the second quarter from 95 in the first quarter. Fisher Asset Management increased its stake by 3% to $4.34 million, while Point72 Asset Management increased by 62% to $625.75 million.
The stock also boasts a low short interest of 1.01% despite the number of shares held short increasing to 13.65 million as of September 30 from 12.34 million as of August 31.
Bottom Line
RTX Corporation’s aerospace business is showing strong operating momentum, backed by stronger margins and faster sales growth. Improving free cash flow also strengthens its ability to support dividends and invest in future growth. However, the stock’s valuation remains a significant consideration. Sustaining that premium will require continued revenue growth, stronger profitability, and consistent free cash flow generation.
While we acknowledge the risk and potential of RTX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RTX and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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