As an investor focused on defensive high alpha, I’m currently bullish on RTX Corp. (RTX), previously better known as Raytheon. After diving into its Q1 2025 earnings, my conviction in the company’s long-term potential has only grown stronger. Despite macroeconomic headwinds and fresh concerns over new tariffs, RTX continues to deliver results that underscore its unique positioning at the intersection of defense, aerospace, and global security. Companies like RTX offer growth and resilience in today’s economic uncertainty and geopolitical volatility.
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RTX (RTX) price history over the past 5 days
Given the confluence of geopolitical and economic facts, RTX offers a rare combination worth owning. Despite the wild market gyrations since Donald Trump’s inauguration in January, RTX stock has held up better than most other U.S. stocks, clearly skittish by prospects of a protracted trade war with tariff hyperinflation to boot.
RTX’s Strong Start to 2025
RTX kicked off FY2025 with impressive numbers. The company posted $20.3 billion in revenue, marking a 5% increase year-over-year. However, if we strip out the noise from divestitures, organic growth looked even better at 8%. For me, that’s an important distinction. It shows that RTX isn’t just growing because of acquisitions or accounting changes—it’s expanding where it counts.
Main Street Data shows RTX’s revenue expansion, split by business segment
Commercial aerospace was a key driver. Collins Aerospace and Pratt & Whitney stood out, with aftermarket sales up 13% and 28%, respectively. On the bottom line, adjusted earnings per share came in at $1.47, beating analyst estimates by 9% and rising 10% year-over-year.
More importantly, adjusted net income rose 11% to around $2 billion. That kind of earnings growth reflects operational discipline and excellent execution. During their quarterly call, management emphasized this, referring to Q1 as “a strong start.” I agree. In a challenging macro backdrop, RTX’s performance is a clear signal of strength.
Free Cash Flow Speaks Volumes
Free cash flow is one of the best metrics we have as investors. It cuts through the noise and tells you what kind of real cash a company generates. RTX delivered $792 million in free cash flow this quarter. That’s particularly notable given that Q1 is usually a softer quarter due to seasonal effects.
RTX (RTX) estimated and reported earnings history
The company’s reaffirmation of full-year guidance for $7 to $7.5 billion in free cash flow was even more reassuring. That’s a solid ramp ahead, suggesting confidence in both execution and demand. I also liked that RTX returned roughly $890 million to shareholders, primarily through dividends. With a dividend yield hovering around 2%, this return of capital strategy further reinforces my confidence that RTX is shareholder-friendly and financially healthy.
Addressing Tariffs and Forward Guidance
Now, it wasn’t all rosy. Management issued cautious full-year guidance, projecting revenue between $83 billion and $84 billion, and adjusted EPS between $6 and $6.15. The elephant in the room? Tariffs. These weren’t baked into the guidance, and RTX estimates they could reduce earnings by about $850 million, or around $0.50 to $0.60 per share.
CEO Chris Calio addressed these headwinds head-on. The company is pursuing several strategies to minimize the impact, including regulatory relief, cost management, and possibly passing price increases onto customers. Even so, the market didn’t love the ambiguity, and the stock fell nearly 9% on earnings release day.
RTX (RTX) price history over the past 24 hours
To me, that reaction may have been overdone. Though tariffs are a real concern, RTX’s track record suggests they’ll navigate this carefully. This could be one of those rare opportunities to buy a high-quality business at a temporary discount.
Why RTX Stock is a Geopolitical Hedge
RTX stock stands out right now because of its positioning as a geopolitical hedge. Governments around the world are upping their defense budgets after all. Europe alone has committed an additional $850 billion to defense over the next few years. Much of that spending will go toward missile defense systems, advanced radars, and other capabilities that RTX provides. Their Patriot missile systems, in particular, are in high demand.
The RTX MIM-104 Patriot surface-to-air missile (SAM) system near Vilnius in Lithuania
But it’s not all defense. RTX maintains a healthy balance between commercial aerospace and defense, with about half of its revenue coming from each. This diversification helps RTX stay stable in turbulent times and thrive when the economy picks up. It’s rare to find a company that benefits from commercial recovery and geopolitical disruption, but RTX checks both boxes. Their $217 billion backlog, with $92 billion tied to defense contracts, provides a clear runway for future earnings.
Understanding the Macroeconomic Backdrop
The U.S. economy is not in the best shape right now. The dollar has weakened to multi-year lows, tariffs are back in play, and elevated interest rates have slowed parts of the economy. If conditions deteriorate further, this could potentially impact commercial aerospace orders.
But there’s a silver lining. A weaker dollar actually helps RTX, making its exports more attractive globally. While the Federal Reserve has held rates high to combat inflation, there’s now talk of possible cuts to help stimulate growth. Pressure from Donald Trump is also brewing. The labor market also remains relatively strong, which supports continued travel demand, which is crucial for RTX’s commercial segment.
Is RTX a Good Stock to Buy?
On Wall Street, RTX has a consensus Strong Buy rating based on 12 Buys, four Holds, and zero Sells over the past three months. The average RTX price target is $144.75, indicating ~27% upside potential over the next 12 months.
I remain firmly bullish after reviewing RTX’s Q1 earnings and digesting its guidance and macro risks. This defense sector goliath knows how to perform, even when the world feels unpredictable. With its dual exposure to commercial aerospace and defense, strong free cash flow, growing backlog, and proactive leadership, RTX can ride out near-term noise and continue delivering long-term value.
Tariffs are a genuine concern, but RTX has faced more considerable challenges before. This is still one of the most well-rounded plays in the industrial and defense sectors. In a world that’s anything but stable, I find comfort in holding shares of a company built to thrive in uncertainty. I’ll be watching the next few quarters closely—but for now, I’m holding tight and looking to add on dips.
