RTX Wins $205M Contract for Radar-Guided Gun: Buy the Stock Now?

RTX Corp.’s (RTX) business segment, Raytheon, recently secured a contract worth $205 million for the continued production of the Phalanx Close-In Weapon System (“CIWS”). The company will also provide the upgrades, conversions, overhauls, and related equipment for the Phalanx CIWS. Installed on all U.S. Navy surface combatants and used by 24 allied nations, Phalanx is a radar-guided gun used as a last-line defense against anti-ship missiles and close-in threats. This award reinforces RTX’s position as a global leader in combat-proven radar expertise and might encourage defense investors seeking resilient growth to add this stock to their portfolio right away.However, a well-considered investment decision cannot rest on a single event such as a contract award. Instead, it should be based on a holistic assessment of the company’s fundamental strengths, growth outlook, recent market performance, and associated risks. The following analysis examines RTX through this lens. RTX YTD PerformanceRTX’s shares have gained 33.3% in the year-to-date period, outperforming the Zacks Aerospace-Defense industry’s surge of 27.8% and the broader Zacks Aerospace sector’s rise of 26.3%. The stock has also outpaced the S&P 500’s return of 10.8%.Image Source: Zacks Investment ResearchNotable gains at the bourses have also been reflected in the year-to-date share price performance of other prominent defense contractors, such as The Boeing Company (BA) and General Dynamics (GD). Shares of Boeing surged a solid 30.5%, while those of General Dynamics rose 22.5%.Will RTX Stock Continue to Ride?For defense contractors like RTX, a steady flow of contract wins from the Pentagon and U.S. allies for its combat-proven defense products, such as the most recent award, serves as a major growth catalyst. Keeping up with this trend, RTX secured notable defense bookings worth $12 billion during the second quarter of 2025, which resulted in a solid defense backlog of $92 billion as of June 30, 2025. Such a substantial backlog not only reflects sustained demand for RTX’s advanced defense systems but also provides strong visibility into future revenues, reinforcing the company’s long-term growth prospects. In line with this, the Zacks Consensus Estimate for RTX’s long-term (three-to-five-year) earnings growth rate is pegged at a solid 9.1%.Notably, sustained order flow from the Pentagon and allied nations, supported by escalating global geopolitical tensions, has also been a key driver of top and bottom-line growth for other major defense contractors. To this end, the consensus estimates suggest long-term earnings growth of 17.9% for Boeing and 10.7% for General Dynamics. Moreover, as of June 30, 2025, RTX reported $4.78 billion in cash against $3.72 billion in current debt, highlighting strong short-term solvency. The stock’s interest coverage improved to 5.2 from 4.3 sequentially, while its current ratio of 1.01, being more than 1, confirmed adequate liquidity. Such financial strength should keep the stock buoyant on Wall Street and support resilience amid market volatilities. Now, let’s take a sneak peek at RTX’s near-term earnings and sales estimates to check what those suggest.RTX’s EstimatesThe Zacks Consensus Estimate for second-quarter 2025 revenues suggests a solid improvement of 6.1% from the prior-year quarter’s level, while that for earnings implies a rise of 3.5%. The annual estimated figures for 2025 and 2026 also indicate improvement on both counts.However, the stock’s near-term earnings estimates have moved southward over the past 60 days, suggesting declining analysts’ confidence in this stock’s bottom-line growth prospects.Image Source: Zacks Investment ResearchImage Source: Zacks Investment ResearchRisks to Take Note of Before Choosing RTXBeing a major player in the commercial aerospace industry, RTX continues to face supply-chain disruptions, with shortages of parts, inflation, and labor tightness weighing on costs and deliveries. To this end, the International Air Transport Association’s (“IATA”) June 2025 outlook highlights the sector-wide strain, noting aircraft deliveries are 30% below peak while backlogs have surged to 17,000, leaving airlines short of an estimated 5,400 planes. At a production pace of nearly 2,000 annually, clearing the backlog could take 3-5 years. This bears every possibility of a delay in RTX’s revenue recognition from commercial jet engine sales. Additionally, recent U.S. executive orders issued in February 2025 imposed new tariffs on imports, prompting retaliatory measures from China, the EU and Canada. The resultant turmoil, likely to affect global trade, may, in turn, affect defense stocks such as RTX, BA and GD, which have significant exposure in nations outside the United States.RTX Stock Trading at a PremiumIn terms of valuation, RTX’s forward 12-month price-to-earnings (P/E) is 24.07X, a premium to its peer group’s average of 23.91X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to that of its peers. Image Source: Zacks Investment ResearchHow to Play RTX Stock?In conclusion, while RTX benefits from a solid defense backlog, strong liquidity, and consistent contract momentum, its premium valuation, downward earnings revisions, and persistent supply-chain risks warrant caution. New investors interested in RTX may thus gain from adopting a wait-and-watch approach. However, existing holders of this Zacks Rank #3 (Hold) stock may continue to do so, considering RTX’s market outperformance and resilient revenue growth outlook. 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Click to get this free report The Boeing Company (BA): Free Stock Analysis Report General Dynamics Corporation (GD): Free Stock Analysis Report RTX Corporation (RTX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks