RTX CORPORATION (RTX): what the price assumes

In the published model solve dated 2026-Q2, anchored at $212.01, RTX CORPORATION (RTX) is priced for +20.6% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/RTX

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.1% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.

Per-Model Detail (n=18)

Economic-Unit Decomposition (Sum Of The Parts)

The disclosed units share an operating capital structure; consolidated cash-flow lenses remain coherent and the unit split is explanatory.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• RTX is three franchises in one, Collins Aerospace, Pratt & Whitney, and Raytheon, and its order backlog reached a record $271 billion, up 25%, split about $162 billion commercial and $109 billion defense.
• The counterintuitive read: the trailing operating margin near 11% understates the business, because it still carries the cost of the Pratt GTF powder-metal engine inspection that runs through the end of 2026.
• The watch item is the GTF remediation and guidance; RTX raised full-year 2026 adjusted EPS guidance to $6.70 to $6.90 on strong defense and commercial demand.

Bull Case

The number that reframes RTX is the backlog: $271 billion, up 25% year over year, with a book-to-bill of 1.14, meaning the company is signing new work faster than it is delivering existing work. That backlog is split about $162 billion commercial and $109 billion defense, so RTX is not betting on one cycle. It has years of visible demand from two of the most durable end markets there are, global air travel recovery and rising defense budgets, and the order book grew far faster than revenue this quarter.

Each of the three businesses is a franchise that is hard to dislodge. Raytheon sits inside the defense procurement system, with the filing showing 2025 sales to the U.S. government of $19,237 million in that segment alone, plus $7,061 million at Collins and $6,778 million at Pratt. These are programs measured in decades, and the aftermarket is the prize: once a Pratt engine or a Collins system is on an aircraft, it generates parts and service revenue for the life of the platform. GTF-powered aircraft deliveries now exceed 2,700 with a backlog of roughly 8,000 engines, and recent wins from VietJet and Finnair keep feeding that installed base.

The trailing financials understate the earnings power because they still carry the GTF inspection cost. Q1 2026 revenue grew 9% to $22.076 billion with all three segments growing sales and profit, and RTX raised full-year adjusted EPS guidance to $6.70 to $6.90. As the powder-metal remediation winds down through the end of 2026 and the aftermarket on a growing installed base compounds, the margin has a clear path higher. The share count has fallen about 2.3% a year, adding a per-share tailwind on top of the operating recovery.

Bear Case

The structural truth a holder has to sit with is that RTX broke its own most important product and is still paying for it. The filing states that in July 2023 Pratt & Whitney determined "a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100G-JM (PW1100) GTF fleet", the engine that powers the A320neo family, and that the company expects to perform inspections through the end of 2026, incurring "significant customer support and mitigation costs and significant labor, material, and related costs" along with reputational harm. That is the depressed-margin story in the company's own words: roughly 11% trailing operating margin is the bull's opportunity and the bear's evidence that the flagship engine program has a manufacturing problem that costs years and billions to fix.

The bet underneath the price is aggressive even setting GTF aside. At about 31 times trailing operating income, the market is paying for company-wide operating growth near 21% a year for five years, a pace only about a third of comparable companies have sustained that long. No standard valuation family reaches the price: it is rich on assets, on earnings power, on peer multiples, and even on forward growth. The growth methods come closest precisely because they credit the margin recovery the bull case describes, but even they sit below the price. A buyer is paying for the recovery to happen and then to keep going.

The balance sheet is a real constraint on the margin for error. Net debt is about $33.8 billion, roughly 3.4 times operating income, accumulated partly through the Raytheon merger and the costs of the GTF program. The defense business also carries fixed-price-contract and government-budget risk, where a program delay or a tighter procurement cycle hits a concentrated customer. RTX has been pruning, selling its Collins actuation, Simmonds Precision, and Raytheon cybersecurity businesses, which sharpens the portfolio but also signals the company is reshaping under pressure. The franchises are excellent; the question the price ignores is how cleanly the GTF overhang clears before the next problem arrives, with no value-method floor nearby if it does not.

Valuation

The price embeds a recovery, and reading it correctly starts with the depressed denominator. At about 31 times trailing operating income, inverting the price implies company-wide operating growth near 21% a year for five years, which lands within range because the trailing operating margin of about 11% is held down by the ongoing GTF inspection costs. Strip those out and the implied growth is less heroic than the headline multiple suggests; the market is paying for normalized earnings, not the impaired ones the trailing figure shows.

That is why the methods read as universally rich. No valuation family reaches the price: the asset-value, earnings-power, peer-multiple, and forward-growth lenses all land below it, several well below. For most companies that pattern signals overvaluation, but for RTX it reflects a transitional margin: the static methods value the impaired present, while the price values the recovered future. The forward-growth methods come closest because they alone credit the margin path. The cleanest peer comparison is against the other primes, where RTX's commercial-aerospace exposure differentiates it, since Collins and Pratt give it a recovery lever the pure defense names lack.

Solvency bounds the downside and frames the risk. Net debt of about $33.8 billion is roughly 3.4 times operating income, manageable for a company with $271 billion of backlog and a 1.14 book-to-bill, but heavy enough that the recovery needs to arrive on schedule. The falling share count, down about 2.3% a year, is real capital return that compounds the per-share math. What a buyer underwrites at this price is that the GTF remediation winds down through the end of 2026 and the aftermarket on a growing installed base lifts margin toward its normalized level, with the record backlog providing the revenue visibility to get there.

Catalysts

Q1 2026 beat and the company raised its outlook. Adjusted EPS of $1.78 surpassed expectations, revenue grew 9% to $22.076 billion, and all three segments, Collins Aerospace, Pratt & Whitney, and Raytheon, posted sales and profit growth. The headline was the order book: a record $271 billion backlog, up 25% year over year, with a 1.14 book-to-bill and a roughly $162 billion commercial, $109 billion defense split, which gives RTX years of demand visibility across both markets.

The segment-level catalysts kept building. GTF-powered aircraft deliveries now exceed 2,700 with a backlog of about 8,000 engines, and recent wins included VietJet selecting the GTF for an additional 44 aircraft and Finnair planning to buy up to 46 GTF-powered Embraer E2 aircraft, while Pratt's military business won over $3 billion for F-135 Lot 19 production. On the strength of the quarter, RTX raised full-year 2026 adjusted sales guidance to $92.5 billion to $93.5 billion and adjusted EPS guidance to $6.70 to $6.90.

The overhang to watch is the GTF powder-metal remediation, which runs through the end of 2026 and continues to carry significant cost. Progress on completing those inspections and the pace of aftermarket recovery are the variables that move margin, alongside defense budget developments. The next quarterly print, with backlog and GTF remediation updates, is the event that tests whether the recovery is on track.

Peer Cohorts (Per Segment, With Filing Citations)

Collins Aerospace / Pratt & Whitney / Raytheon (reported)

• GD (GENERAL DYNAMICS CORPORATION)
• FY2025 10-K: …while offering customers options to reduce or eliminate their carbon footprints. Gulfstream and Jet Aviation have been at the forefront of the industry by adopting and expanding the availability of sustainable aviation fuel (SAF), which achieves as much as an 80% reduction in carbon dioxide emissions per gallon over…
• FY2025 10-K: …Worth, Texas; Appleton, Wisconsin; Sydney, Australia; Mexicali, Mexico; Singapore; Basel, Switzerland; Farnborough, United Kingdom. • Marine Systems - San Diego, California; Groton, New London and Waterford, Connecticut; Jacksonville, Florida; Bath and Brunswick, Maine; Middletown and North Kingstown, Rhode Island;…
• NOC (NORTHROP GRUMMAN CORP /DE/)
• FY2025 10-K: …growth and a series of acquisitions and divestitures, including the following: • 1994 - Acquired Grumman Corporation, a premier military aircraft systems integrator. The combined company was renamed Northrop Grumman Corporation; • 1996 - Acquired the defense and electronics businesses of Westinghouse Electric…
• FY2025 10-K: TION History Northrop Grumman Corporation (herein referred to as "Northrop Grumman," the "company," "we," "us," or "our") is a leading global aerospace and defense technology company. We deliver a broad range of products, services and solutions to U.S. and international customers, and principally to the U.S.…
• LMT (LOCKHEED MARTIN CORPORATION)
• FY2025 10-K: …• Training, logistics and simulation (TLS) programs such as those providing sustainment services and programs that provide simulators and associated training to U.S. military and foreign government customers. Effective January 2026, the IWSS and C6ISR lines of business within RMS were restructured and renamed…
• FY2025 10-K: …objective of procuring 2,456 aircraft for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy. We also have commitments from seven international partner countries and 12 FMS customers, who collectively during the year indicated their intent to purchase 72 additional aircraft beyond their existing programs of record.…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.