On Thursday, Deutsche Bank adjusted its stance on RTX Corp. (NYSE:RTX), upgrading the stock from Sell to Hold, and increased the price target to $129 from $109. The shift in rating comes as the analyst anticipates third-quarter earnings per share (EPS) to surpass Wall Street expectations, and suggests that RTX Corp. can maintain its full-year guidance despite the impact of the Boeing (NYSE:BA) strike, due to a less demanding second-half setup.
The analyst has also made slight adjustments to the EPS estimates for 2025 and 2026, taking into account a slower original equipment (OE) rate ramp at Boeing and Airbus. However, the impact of this slowdown is expected to be largely mitigated by a more favorable aftermarket mix. The upgrade to Hold reflects the analyst's view that the market is increasingly recognizing RTX Corp. as a defense stock, which could potentially enable it to outperform other defense companies through actual operating leverage.
RTX Corp.'s current valuation is similar to that of pure defense companies, but with a more attractive long-term growth outlook given its aerospace exposure. The analyst believes this could lead to further upside for the stock. Despite the positive outlook, operational risks remain a concern, prompting the analyst to maintain a Hold rating rather than upgrading to Buy. The analyst notes that continued operational improvements are crucial for the company's future performance.
In other recent news, Raytheon (NYSE:RTN) has secured a series of significant contracts and expanded its operations. The company was awarded a contract by the Defense Advanced Research Projects Agency (DARPA) to develop ultra-wide bandgap semiconductors, which could enhance the performance of electronic devices in defense applications. Raytheon's Advanced Technology team will focus on developing semiconductor films based on diamond and aluminum nitride.
Furthermore, Raytheon's division, Pratt & Whitney, opened a new $255 million military engine facility in Oklahoma City. The facility expansion is expected to create an additional 100 full-time jobs over the next five years. The U.S. Department of State also approved a potential sale of Stinger missiles to Egypt, valued at approximately $740 million, with Raytheon as the principal contractor.
Raytheon Technologies (NYSE:RTX) Corp was also awarded a $525 million contract by the U.S. Navy for the production of Enhanced Sea Sparrow Missiles (ESSM) Block 2. The company's CEO, Christopher Calio, has expressed a preference for streamlining existing operations over engaging in significant mergers and acquisitions.
InvestingPro Insights
Recent data from InvestingPro adds weight to Deutsche Bank's upgraded outlook on RTX Corp. The company's market capitalization stands at a robust $164.73 billion, reflecting its significant presence in the Aerospace & Defense industry. RTX's revenue for the last twelve months as of Q2 2024 reached $72.42 billion, with a quarterly revenue growth of 7.68% in Q2 2024, indicating steady expansion.
InvestingPro Tips highlight RTX's strong market position and financial performance. The company has maintained dividend payments for 54 consecutive years, demonstrating financial stability and commitment to shareholder returns. This aligns with the analyst's view of RTX as an attractive investment in the defense sector. Additionally, RTX has shown a high return over the last year, with a remarkable 80.24% price total return, supporting the analyst's positive outlook on the stock's potential to outperform.
It's worth noting that RTX is trading near its 52-week high, with its current price at 98.81% of the 52-week high. This, combined with the analyst's increased price target, suggests potential for further growth. Investors seeking more comprehensive analysis can access 11 additional InvestingPro Tips for RTX, providing a deeper understanding of the company's prospects.
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