During the October 5 episode of Mad Money, a caller asked why RTX Corporation (NYSE:RTX) had weakened. Jim Cramer first addressed concerns about defense spending, as he said:
Okay, so people feel that, for some reason, of which I disagree, that the defense budget has peaked and we’re not going to put any more money into defense, that enough has been spent. Meanwhile, RTX keeps getting contract after contract after contract.
New Missile Orders Add to a Large Backlog
Recent awards support Cramer’s observation about continued demand. On September 28, RTX’s Raytheon business announced an AMRAAM production contract valued at up to $20.7 billion. The agreement covers five years with two option years and supports a substantial increase in missile production. The maximum contract value should not be confused with revenue already earned. The size of the award is only part of the story. A closer look at the missile deal highlights a production test that the headline figure alone does not capture.
RTX Corporation also reported second-quarter sales of approximately $24.7 billion, up 14%, and adjusted earnings per share of $1.89, up 21%. Its backlog reached $289 billion, comprising $170 billion in commercial orders and $119 billion in defense orders. Management raised its full-year adjusted EPS outlook to $7.10 – $7.25 from $6.70 – $6.90. RTX also stands to benefit from a broader push to fund critical munitions, though the spending agreement comes with conditions that matter for what follows.
Commercial Aviation Brings a Different Set of Risks
Cramer then explained why defense orders do not account for the whole business:
However, it also has aerospace, commercial aerospace, and anything touching commercial aerospace has been weak because people feel with oil this high, it’s only a matter of time before the airlines cut their purchasing of planes. It has not happened, but my Charitable Trust has done very poorly in Boeing. I always like to play with an open hand. It’s done poorly, and it just bothers me tremendously. But RTX is pretty much in the same situation.
That concern is a possibility. Pratt & Whitney’s latest quarterly commercial aftermarket sales increased 25%, even as commercial original-equipment sales declined 8%. RTX also continues to absorb costs associated with the Pratt & Whitney powder-metal issue. Its second-quarter filing estimated an approximately $700 million cash impact in 2026, including customer credits and the timing of partner recoveries.
At approximately 24.9x forward earnings, RTX traded below GE Aerospace’s 36.9x but above Lockheed Martin’s 16.6x. Its combination of commercial aviation and defense makes both comparisons useful, while also preventing a simple conclusion that it is cheap across the sector. Cramer’s October comments focused on defense spending and commercial aviation, but his earlier explanation for RTX’s weakness centered on a different concern.
Institutional Ownership Edges Lower
According to Insider Monkey, 92 hedge funds held RTX Corporation in the second quarter, compared with 95 in the first. With 22.9 million shares, Fisher Asset Management was the most significant hedge fund holder of the company in Q2. It is worth noting that Point72 Asset Management and D E Shaw substantially increased their holdings in the stock by 62% and 116%, respectively. Short interest was 1.01% of the float, indicating relatively limited direct short positioning despite the recent weakness discussed by Cramer.
RTX’s order book gives it plenty of work, and recent missile awards add to that visibility. The challenge is delivering those orders profitably while managing engine-related costs and commercial aviation exposure. Cramer sees continued defense demand; shareholders still have to account for the rest of the business.
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