RTX Corporation (NYSE:RTX) just received one of the largest missile production awards in its history. The Pentagon awarded RTX’s Raytheon business a five-year multiyear contract with two option years valued at up to $20.7 billion. This is part of the Pentagon’s efforts to increase weapons production to replenish dwindling stockpiles amid the conflicts in Ukraine and the Middle East.
The headline figure is significant. But investors should resist treating it as immediate revenue for RTX Corporation. Instead, the more important question is whether Raytheon can convert the strong defense demand into profitable growth. RTX Corporation (RTX) recently doubled down on defense manufacturing — is the stock still a buy?
That question matters more considering Raytheon’s rapidly expanding backlog. The business booked $20 billion of defense contracts in Q2. It had an $86 billion backlog at the end of Q2, up from $75 billion at the end of 2025. The backlog included $1.8 billion related to AMRAAM production before the latest award.
Raytheon Already Has the Demand. Now It Must Prove the Capacity
The latest award strengthens Raytheon’s production pipeline that was already expanding rapidly. At this point, RTX Corporation does not need to convince investors that customers want its missiles. It needs to demonstrate that it can manufacture those missiles fast and efficiently. Investors want to see the business convert the demand quickly into strong revenue, operating profit, and cash flow.
RTX is investing in facilities, workers, and its supplier base. The company is also exploring European co-production with NATO partners to expand capacity and improve supply-chain resilience. The latest contract gives Raytheon greater demand visibility to justify investments in expanded capacity.
RTX says AMRAAM production nearly doubled in 2025 versus 2024. The company is now aiming to produce at least 1,900 missiles annually. That’s roughly a 58% increase from that earlier production target of 1,200 missiles.
In Q2, Raytheon’s sales increased 18% YoY to $8.27 billion, and adjusted operating profit rose 29% to $1 billion. Adjusted operating margin expanded to 12.6% from 11.6% a year ago. RTX Corporation cited higher volume, favorable mix, and improved productivity as being behind these gains. These are signs of improving execution.
The Bull Case Could Break at the Factory
A large order doesn’t automatically produce attractive returns. Raytheon must simultaneously expand its manufacturing capacity while controlling costs. A rapid production ramp can initially increase costs before higher volumes generate operating leverage.
There is also a valuation hurdle. RTX traded at about 24.6x forward earnings in late September. That compared with 16.2x for Lockheed Martin (LMT), 17x for Northrop Grumman (NOC), and 18.5x for General Dynamics (GD). That puts RTX at a around 43% premium to the average forward PE of those three peers. The premium means RTX needs to execute almost flawlessly for the defense backlog to translate into further earnings support. While RTX’s backlog is booming, but one recent analysis argues the real risk is the price investors are already paying. [See why RTX may be a bad investment at today’s valuation.]
If Raytheon reaches 1,900 AMRAAMs annually while improving its margins, investors will have evidence that the contract is translating into profitable growth. But if output rises but margins deteriorate, the headline award would prove less economically attractive than it initially appears.
Fluctuating Hedge Fund Backing and Limited Short Bets
The Insider Monkey database shows 92 hedge funds held RTX Corporation in Q2, down from 95 in Q1 but above 79 in Q4. All five of the largest hedge fund holders increased their positions. Fisher Asset Management by 3%, Point72 Asset Management by 62%, D.E. Shaw by 116%.
Short interest remains low at about 1% of the float, though it edged up slightly from the previous reading.
The AMRAAM award strengthens RTX’s demand visibility. But investors should judge the deal by what Raytheon produces and earns. That’s particularly important because RTX already trades at a premium valuation to major defense peers. Raytheon’s ability to protect its margins while scaling manufacturing will be the more important test.
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