Bernstein raises RTX price target to $232, with strong Raytheon growth and Pratt GTF improvement as core drivers

Overview

This report is Bernstein’s company research update on RTX Corporation. It concludes that RTX’s second-quarter results were significantly better than expected, with revenue and earnings guidance raised across Pratt & Whitney, Raytheon, and Collins. The analysts therefore increased their 2026 and 2027 earnings forecasts and raised the 12-month price target to $232, but maintained the Market-Perform rating because the upside relative to the current share price is approximately 8%.

Core views

The core views are: Raytheon’s growth and margin improvement are the largest positive variables, driven by tactical missiles, missile defense, international orders, and a higher proportion of mature fixed-price programs; Pratt & Whitney has made visible progress on the GTF grounding issue, and the GTF-A is expected to alleviate the earlier PW1100 problems, although validation will take time; Collins revenue growth is strong, driven by commercial OE and the aftermarket, but margin expansion still needs to materialize further.

Analysis framework

The report combines segment operating analysis with valuation upgrades. It first compares second-quarter results, orders, backlog, revenue growth, margins, and management guidance, then incorporates the revenue and profit outlooks for Raytheon, Pratt & Whitney, and Collins into 2026–2027 EPS forecasts, and finally derives a 12-month price target using relative EV/EBITDA multiples and a four-year terminal value methodology.

Methodology notes

• Valuation methodsEV/EBITDA terminal value method

  Estimate enterprise value using an EV/EBITDA multiple based on the terminal value four years forward.

  Bernstein values the aerospace company using a four-year forward terminal value and an EV/EBITDA multiple, deducts net debt to derive equity value, discounts it to the valuation date, and adds interim shareholder cash distributions; the RTX price target uses a 20.7x multiple, above the previous 20.0x.

• Earnings forecastsSegment forecasts

  Assess revenue, margins, and guidance changes separately for Pratt & Whitney, Raytheon, and Collins.

  The report analyzes the sources of revenue growth, margin drivers, and full-year management guidance for each of the three major businesses, then consolidates them into group revenue, EPS, and FCF forecasts.

• Rating frameworkRelative performance rating

  Market-Perform indicates broadly in-line performance relative to the benchmark index over the next 12 months.

  Bernstein’s U.S. equity ratings are benchmarked against the S&P 500 over the next 12 months; Market-Perform indicates expected relative performance within plus or minus 15 percentage points.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• RTX Corporation

  Covered security

  Strengths

  Portfolio exposure spans commercial aerospace and defense; second-quarter revenue and EPS both exceeded expectations, full-year revenue and earnings guidance was raised, and backlog reached 289bn USD.

  Weaknesses

  The current price target implies approximately 8% upside from the closing price, and the rating remains Market-Perform; some segment margins remain below analyst expectations.

  Comparison

  Second-quarter adjusted revenue and EPS both exceeded consensus and Bernstein’s prior forecasts.

  Risks

  Changes in commercial aerospace demand, defense budgets, program execution, Pratt GTF reliability, and international military demand.

• Raytheon

  Core defense business segment

  Strengths

  Second-quarter revenue was approximately 8.27bn USD, up 18% year over year; book-to-bill was 2.42x, driven by Patriot, Standard Missile, AMRAAM, and international orders.

  Weaknesses

  Defense program execution, funding disbursement, and order delivery timing could still affect revenue recognition and margins.

  Comparison

  Revenue was approximately 745mn USD above consensus, while adjusted operating profit was approximately 154mn USD above consensus.

  Risks

  Changes in U.S. and international defense budgets, fixed-price program execution risks, classified programs, and missile production ramp-up risks.

• Pratt & Whitney

  Aerospace engine business segment

  Strengths

  Second-quarter revenue was approximately 8.89bn USD, up 16% year over year; commercial aftermarket grew 25% and military sales grew 23%; the number of GTF-related AOG aircraft declined significantly.

  Weaknesses

  Commercial OE revenue was affected by lower spare-engine deliveries, and the GTF-A’s long-term reliability still requires in-service validation.

  Comparison

  Revenue was approximately 690mn USD above consensus, while grounded aircraft declined from approximately 660 at the end of December 2025 to approximately 540.

  Risks

  A recurrence of GTF performance issues, increased V2500 retirements, insufficient MRO turnaround capacity, and pressure on the relationship with Airbus.

• Collins

  Aerospace systems business segment

  Strengths

  Second-quarter revenue was 8.21bn USD, with 13% organic growth; commercial OE grew 26% and commercial aftermarket grew 10%.

  Weaknesses

  Margin expansion has not yet fully materialized; the reported margin of 15.9% was below the adjusted margin of 16.7% due to restructuring costs.

  Comparison

  Revenue was approximately 345mn USD above consensus, while adjusted operating profit was approximately 53mn USD above consensus.

  Risks

  An OE product mix skewed toward widebody aircraft, SG&A expenses, the defense business mix, and the impact of completed divestitures.

Key data

• RatingMarket-PerformThe report maintains the rating unchanged.
• Price target232.00 USDRaised from 213.00 USD.
• Closing price215.22 USDAs of July 31, 2026.
• Implied upside8%Based on the closing price and price target shown in the report.
• Second-quarter adjusted EPS1.89 USDAbove consensus and Bernstein’s prior estimate of 1.66 USD.
• Second-quarter adjusted revenue24.71bn USDAbove consensus of 22.90bn USD.
• 2026 adjusted EPS forecast7.25 USDRaised from 6.97 USD.
• 2027 adjusted EPS forecast7.82 USDRaised from 7.51 USD.
• 2026 adjusted sales guidance95.0bn-96.0bn USDPreviously 92.5bn-93.5bn USD.
• Backlog at the end of the second quarter289bn USDCommercial aerospace $170bn and defense $119bn; above $271bn at the end of the first quarter.
• Raytheon second-quarter book-to-bill2.42xTrailing 12-month book-to-bill was 1.77x.
• Number of A320-family aircraft grounded with PW1100 enginesApproximately 540 aircraftApproximately 26% of the fleet, a significant improvement from approximately 660 aircraft at the end of December 2025.

Impact & implications

The higher price target reflects improved confidence in RTX’s medium-term growth and margin outlook, particularly the valuation multiple expansion associated with Raytheon defense demand and mitigation of Pratt GTF risks. However, the rating remains Market-Perform, indicating that the report believes positive factors are already partially reflected in the share price. Further re-rating requires continued delivery of Raytheon margin improvement, GTF-A reliability, Collins margin expansion, and full-year cash flow guidance.

Risks

• Commercial aerospace and defense end-market demand may fall short of expectations.
• Pratt & Whitney’s GTF execution and reliability issues remain major downside risks.
• Although the GTF-A has received certification for A321 aircraft and is planned to enter service this year, approximately two years of in-service data will be needed to more fully validate reliability.
• As PW1100-powered aircraft return to the fleet, the number of V2500 retirements may increase, affecting aftermarket revenue.
• The defense business faces risks from program execution, budget funding, and fluctuations in international demand.
• Collins margin expansion may continue to lag revenue growth.

What to watch

• Whether Raytheon orders, book-to-bill, backlog conversion, and margins can continue improving toward above 13%.
• Whether Pratt & Whitney’s PW1100 AOG count continues to decline and improvements in MRO output and turnaround times persist.
• The GTF-A’s reliability after entering service, customer acceptance, and impact on the relationship with Airbus.
• Revenue growth and margin performance at Collins as production ramps up across the 737 MAX, 787, and widebody and narrowbody platforms.
• Whether RTX can deliver its 2026 sales guidance of 95.0bn-96.0bn USD, adjusted EPS guidance of 7.10-7.25 USD, and FCF guidance of 8.50bn-8.75bn USD.