Stock Of The Day In Buy Zone With Business 'Firing On All Cylinders'

Defense contractor RTX (RTX) is trading in a buy zone as the company takes advantage of tailwinds in military and commercial markets. One of a number of defense stocks acting well, RTX is the IBD Stock of the Day.

RTX, the nation’s largest defense company, is sitting on a $251 billion backlog as military spending grows and commercial aviation provides another solid path to continued growth.

As European nations boost defense spending and geopolitical risks simmer, the outlook for military contractors is favorable. The iShares U.S. Aerospace & Defense ETF (ITA) is up 50% this year and is close to breaking out to new highs.

GE Aerospace (GE) stock is 1% below the 316.67 buy point of a flat base, while rocket maker Rocket Lab (RKLB) broke out of a cup-with-handle base Friday and climbed to a record high Monday. Rocket support-systems maker Karman (KRMN) rallied above its 50-day moving average Monday.

Howmet Aerospace (HWM) is 2% away from the 211.95 buy point of a flat base. The company on Monday agreed to acquire Stanley Black & Decker’s (SWK) Consolidated Aerospace Manufacturing for $1.8 billion in cash. The business makes components for the aerospace and defense industries.

Defense Spending Drives RTX

At a conference on Nov. 13, RTX Chief Financial Officer Neil Mitchill gushed about the company’s defense outlook.

“The defense business today is really firing on all cylinders,” he said, according to a FactSet transcript. Much of the demand is from international markets, Mitchill added.

“In Europe, you’re seeing substantial upticks in defense spending. We’ve seen that come through in orders for GEM-T, for example, in the third quarter,” he said, referring to a new generation of Patriot missiles. “We’re expecting more orders for integrated air defense systems and the munitions that go along with that.”

In the U.S., the Golden Dome integrated air and missile defense program is an important driver. RTX has “a lot of work” and investment ahead to get production rates up, but the company expects a “very, very strong” return.

On Friday, JPMorgan raised the price target on RTX to 200 from 195 and kept an overweight rating as the firm issued its 2026 outlook for aerospace and defense. In aerospace, JPMorgan expects strong demand and a gradual supply increase to drive growth, although the outlook for defense is “more nuanced,” TheFly.com reported.

Earlier this month, Citi placed a buy rating on RTX with a 211 price target as it initiated coverage on the aerospace and defense sector. Citi calls RTX the “Marquee Megatrend stock,” according to TheFly.com.

RTX Q3 Blasts Past Estimates

The stock gapped up 7.7% on Oct. 21, when RTX reported a superb third quarter that exceeded all analysts’ estimates. Sales rose 12% to $22.478 billion as adjusted earnings rose 17% to $1.70 per share.

Management gave bullish full-year guidance, too. It forecast adjusted (non-GAAP) sales of $86.5 billion-$87 billion, up from a previous estimate of $84.75 billion-$85.5 billion. It also forecast adjusted EPS of $6.10-$6.20, vs. the earlier estimate of $5.80-$5.95.

Pratt & Whitney, RTX’s airplane-engine business, increased Q3 sales 16% year over year, with the biggest increase coming from aftermarket sales, which rose 23%. Sales at the Collins Aerospace division rose 8%. The RTX division’s sales rose 10%, thanks to higher volumes of land and air defense systems, including Patriot air-defense missiles, as well as naval air-defense missiles.

RTX Stock Analysis

RTX stock climbed above the 181.31 buy point of a flat base on Dec. 15. Shares are in a buy zone to 190.38. The relative strength line is also making new highs, which is a bullish sign.

Although the stock has soared 168% from its low in October 2023, RTX’s most recent base was only second stage. That’s because its 18% decline last April undercut the previous base in November 2024 through January of this year. That move reset the base count, essentially giving RTX stock a clean slate for a longer-term advance.

RTX stock has a moderate 21-day average true range (ATR) of 2.1%. The average true range, available on IBD MarketSurge, gauges the characteristic breadth of a stock’s behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.

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