Here's Why RTX Rocketed Higher This Week
Key Points
An improving aerospace supply chain is driving improvement in the aftermarket.
RTX's Raytheon is benefiting from strong international demand for defense products.
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Shares in commercial aerospace and defense giant RTX (NYSE: RTX) rose by 14.1% in the week to Friday morning. The move comes after an excellent set of third-quarter earnings and a hike in full-year guidance, leaving investors optimistic about 2026.
Here's why the market got so excited.
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RTX is firing on all cylinders
It's rare for such a large company to deliver strong performance across all its segments, but that's exactly what's happening with RTX right now. Not only did management raise its headline guidance, but it also raised earnings guidance across all three of its segments.
In common with its aircraft engine peer, GE Aerospace, RTX's Pratt & Whitney is seeing strong aftermarket demand in commercial aerospace, as flight departures remain in solid growth mode, and increased parts availability is encouraging airlines to service engines. In a sign of confidence, management raised its full-year organic sales expectations to "low-to-mid-teens" growth from "low double digits." Profits are now expected to increase by $350 million to $400 million compared to $200 million to $275 million previously.
Collins Aerospace is also seeing strong demand in the aftermarket and continues to benefit from the production ramp at Airbus and, notably, at Boeing. Here again, management raised profit expectations to profit growth of $325 million to $375 million compared to $275 million to $350 million previously on the back of relatively higher margin commercial aftermarket revenue.
Image source: Getty Images.
Finally, management raised its expectations for profit growth in the defense business, Raytheon, from $225 million to $300 million, toward a new range of $400 million to $450 million, reflecting a "favorable international program mix," according to VP of investor relations Nathan Ware.
Where next for RTX?
The update is excellent and speaks to the ongoing improvements in the commercial aerospace industry and a favorable environment for defense spending. While those trends persist, RTX will be an attractive option for investors.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends GE Aerospace and RTX. The Motley Fool has a disclosure policy.
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