RTX Corporation (RTX) - Stock Report

Q1 2026 (reported 21 April 2026) is the freshest investment evidence, and it reads as a strong-demand quarter that should not be annualized. Reported diluted EPS rose 32% year over year to $1.51 and adjusted diluted EPS rose 21% to $1.78, helped in part by an easy prior-year comparison; company-reported free cash flow rose 65% to $1.309 bn after $546 mn of capex, though that is a figure. Backlog climbed to $271 bn from $268 bn at year-end 2025 despite $22.076 bn of sales, with defense bookings near $14 bn versus about $9 bn a year earlier, so book-to-bill ran modestly above 1. Segment execution was broad: Collins posted $7.602 bn of sales at a 17.2% reported operating margin, Pratt $8.173 bn at 8.7%, and Raytheon $6.945 bn at 12.1%. The valuation question is whether this order-and-revenue strength becomes recurring post-capex cash, not whether a single quarter looked good.

The key macro issue is not stronger aerospace demand in isolation, but whether higher flight hours and defense orders pass through Collins, Pratt and Raytheon into post-capex free cash flow after GTF remediation, working capital and program-cost resets. The investment decision is therefore specific: investors are paying for backlog, aftermarket pull-through and Pratt normalization to become cash fast enough to justify a higher DCF anchor. Q1 2026 evidence was constructive on demand — organic sales rose 10% and backlog reached $271 bn — but it does not yet prove that GTF shop-visit capacity, Raytheon program execution and working capital can support the current price.

RTX operates through Collins Aerospace, Pratt & Whitney, and Raytheon. The group is a hybrid commercial-aerospace systems supplier, aircraft-engine OEM and aftermarket platform, and defense prime/subcontractor; calling it simply a defense contractor misses the different cash engines inside the portfolio.

Collins provides aircraft systems, avionics, interiors, connected aviation, mission systems and aftermarket services. Its role is content per aircraft plus aftermarket pull-through: equipment deliveries can be lower-margin seeding activity, while spares, provisioning, parts and repairs carry the higher-quality service economics. Pratt & Whitney designs and services commercial and military engines, including the PW1000G Geared Turbofan and F135. Its role is long-duration engine service economics, but the value bridge is still burdened by GTF Powder Metal inspections, customer credits, shop visits and partner recoveries. Raytheon supplies integrated air and missile defense, sensors, effectors, space systems and classified capabilities. Its role is defense backlog conversion under FAR/DFARS, DCAA/DCMA, ITAR/export-control and program-estimate constraints.

Backlog is central but not self-validating. At 31 March 2026, RTX reported $271 bn of remaining performance obligations, with about 45% tied to long-term commercial aerospace maintenance contracts at Pratt that can run up to 20 years. That service backlog is the balance-sheet resilience that matters: if shop-visit economics and long-term service agreement assumptions hold, leverage is manageable; if cost-to-serve rises, cash flexibility narrows quickly.