If you have followed my research in recent years, you know I look for structural shifts. Right now, we are dealing with a very unique, complex, and bifurcated macroeconomic environment. On one side, we are seeing a deteriorating consumer, squeezed by a vicious K-shaped economic trend. On the other side, we have a physical, business-to-business (B2B) economy that is accelerating at an unprecedented pace. Just look at the average of leading indicators like the Philly Fed and Empire State Manufacturing Surveys below.
What we are witnessing is an explosion in structural defense demand colliding with a commercial aerospace super-cycle. This is a macroeconomic environment that is forcing a boom in hard assets, industrial capacity, and defense architectures.
As the title already gave away, RTX Corp. (RTX) is in a prime spot to benefit from this.
When you look at the company's first-quarter 2026 earnings, which is something we will do together today, the data is no longer just confirming the thesis, but it's forcing a repositioning. Capital is already moving, and in many cases, it's moving into the exact irreplaceable industrial places that RTX controls.
Hence, in this deep dive, I’ll explain:
The exact indicators from 1Q26 confirming the acceleration.
What the corporate data is telling us about the structural moats at Pratt & Whitney, Collins Aerospace, and Raytheon.
And most importantly, how RTX is navigating a hollowed-out supply chain to secure its future cash flows.
So, let’s get to it!
The RTX Business Model: Engineered Resilience
First, we have to understand what kind of dominant situation RTX has created. The merger that formed the modern RTX brought together pure-play defense platforms with absolute commercial aerospace dominance. This dual-market exposure creates an undeniable moat.
And I guess most know how much I love industrial moats.
Think about it like this: because supply chains have been managed so conservatively over the last decade, and barriers to entry in aerospace are practically insurmountable, any uptick in demand is instantly colliding with structural bottlenecks. The result is a massive, secular transfer of pricing power that directly benefits companies operating with hard-to-replace infrastructure.
Sounds good, doesn’t it?
Pratt & Whitney: The commercial engine business is all about steep barriers to entry and long-tailed cash flows. That’s also why I own GE Aerospace (GE). Developing a modern commercial turbofan, such as the Geared Turbofan (“GTF”), requires billions in upfront capital and years of certification. The true economic engine, however, lies in the aftermarket. Once an engine is sold to a customer, it enters a service life of decades. Through long-term Fleet Management Programs, Pratt & Whitney captures recurring, high-margin revenue from maintenance, repair, and overhaul (“MRO”) services. The installed base is massive, and it is steadily shifting into its most profitable lifecycle phases. In general, in this industry, engines are sold close to cost. The money is made once the engine is installed.
Collins Aerospace: Collins provides the mission-critical nervous system of many airplanes. They manufacture the avionics, flight controls, aero-structures, and power generation systems that keep aircraft in the air. The switching costs here are massive. Even better, Collins generates significant revenue through pay-by-the-landing contracts. Every time a commercial aircraft takes off and lands, Collins essentially collects a toll, providing a highly predictable annuity stream that is tethered entirely to physical utilization, completely free from the sluggishness of retail consumer spending.
Raytheon: On the defense side, Raytheon specializes in integrated air and missile defense (“IAMD”), precision weapons, and advanced effectors. Unlike platforms such as fighter jets or submarines, which are procured in limited quantities, munitions are consumable. As some of you may know, the current global landscape has exposed a critical lack of "munitions depth" among militaries. Raytheon’s franchise programs, including Patriot, NASAMS, AMRAAM, and the Standard Missile family, are deeply embedded in the defense architectures of the U.S. and its allies.
With that said, I already gave it away a bit in the chart above, but financials confirm my thesis.
RTX Is Firing On All Cylinders
Before I continue, I have to mention that BNP Paribas made clear that among recent earnings releases in this space, RTX stands out - in a bullish way:
BNP Paribas analyst Matt Akers on Tuesday struck an upbeat tone on aerospace and defense stocks after reviewing fresh quarterly results from RTX (RTX), Northrop Grumman (NOC) and GE Aerospace (GE), highlighting RTX (RTX) as the clearest winner of the group thanks to stronger guidance and broad-based execution.
In a flash note to clients, Akers said RTX (RTX) delivered a “good result all around,” pointing to earnings beats across Collins Aerospace, Pratt & Whitney and Raytheon. The most meaningful takeaway was a higher outlook for Raytheon, where revenue growth is now expected in the high-single-digit range, above the company’s prior forecast, he said.
Akers added that RTX’s (RTX) 14% organic aftermarket growth should also reassure investors watching the health of commercial aviation demand. He said the quarter could serve as a positive read-across for other aerospace names tied to airline maintenance and fleet activity. BNP Paribas maintained its Outperform rating on RTX with a $235 price target. - Via Seeking Alpha
To throw some numbers at you, RTX delivered adjusted sales of $22.1 billion, which translates to a 10% organic growth rate year-over-year. This top-line expansion was supported by all three segments. Thanks to these numbers, adjusted EPS hit $1.78. That’s a 21% increase from the prior year.
However, and this is super important, because capacity is so tight across the global economy, achieving growth requires elite execution. CFO Neil Mitchill explicitly highlighted this efficiency, noting the team succeeded by "growing organic sales and segment profit double digits with only a 1% increase in head count". This is proof of massive operational leverage.
And, even better, the forward-looking indicators are the most compelling part of the story. CEO Christopher Calio summarized the structural demand perfectly: "Our book-to-bill in the quarter was 1.14, and our backlog is a record $271 billion, up 25% year-over-year with strong commercial and defense awards in the quarter".
This means two things. First, it shows that for every dollar in finished work, RTX gets $1.14 in new orders. That is indicative of revenue growth. Second, it shows that the B2B economy is rapidly moving goods, and RTX's backlog proves the demand is highly inelastic.
Segment Breakdown: Where Capital Is Flowing
Moreover, when we dig deeper, we find proof of a number of megatrends in this space that were highly beneficial in 1Q26 and are set to be bullish for many more quarters to come.
Pratt & Whitney: Although commercial OE sales dipped 1%, the high-margin commercial aftermarket surged 19%, which was driven by heavier shop visits for large commercial engines and Pratt Canada. Regarding the much-discussed GTF fleet management plan, the technical outlook remains firmly on track. Calio noted that: "PW1100 AOGs were down around 15% compared to the end of last year. We expect this downward trend to continue". This is actively enabled by a 23% year-over-year increase in MRO output. This shows the company is effectively managing the GTF problems in recent years and that the maintenance supercycle is in great shape.
Collins Aerospace: In this segment, commercial OE exploded by 15% on the back of narrow-body and wide-body production ramps. The commercial aftermarket grew 7%, driven notably by a 15% jump in provisioning. Despite a massive 130 basis point headwind from tariffs, Collins expanded its operating margins by 10 basis points, which shows how well it controls costs.
Raytheon: The defense division was the breakout star. Raytheon posted roughly $7.0 billiion in adjusted sales, which is up 9% organically, fueled by surging demand for land and air defense systems (including Patriot and GEM-T) and naval munitions. The segment recorded $6.6 billion in bookings in the first quarter alone.
And that’s still not everything.
The capacity that flooded the logistics market during prior cycles is gone. Management is explicitly dealing with a hollowed-out supply side, especially in bottlenecks like rocket motors and microelectronics.
To make matters better for RTX, the government's forced pivot to physical investment guarantees long-term support. Raytheon recently advanced five landmark framework agreements with the Department of War for critical munitions, including Tomahawk, AMRAAM, and the Standard Missile family. During the call, the company emphasized the stakes for the broader industrial ecosystem: "Once finalized, these agreements would provide firm demand signals for RTX and our suppliers to invest and ramp production well above existing rates over the next decade".
That’s the point when booming orders and accelerating revenue growth occur at the same time.
Confirming the pace of the ramp-up, Calio noted, "For example, we saw further progress on munitions output at Raytheon in Q1 with total deliveries up over 40% year-over-year". RTX has invested nearly $900 million in CapEx over the last three years to expand capacity at key sites in Andover, Huntsville, and Tucson.
And then there’s AI.
According to RTX, it is on track to connect 60% of its annual manufacturing hours to its proprietary data and analytics platform by the end of this year. That’s the foundation for the deployment of humanoids. If they pull this off successfully, it’s a massive tailwind for margins.
There’s another layer to the bull thesis coming from drone warfare.
During the first quarter, RTX successfully demonstrated a non-kinetic, reusable variant of its Coyote counter-UAS system, which means it’s addressing the urgent demand for cost-effective drone defense. The quote from a news article last month perfectly shows how RTX is now a bigger player in a market that most considered to be in the hands of disruptors:
The capability supports the US Army’s Low, slow, small-unmanned aircraft Integrated Defeat System (LIDS). Within this framework, Coyote pairs with Raytheon’s Ku-band Radio Frequency Sensor to provide integrated detect-and-defeat performance. Together, they detect, track, and counter unmanned aircraft systems at extended ranges and at higher altitudes than similar-class effectors. - Thomasnet
Valuation
RTX isn’t cheap - at least not obviously cheap.
As we can see below, it has a premium valuation close to 30x earnings.
However, the company continues to surprise the market.
Given the strength of the defense portfolio and robust commercial aftermarket demand, RTX upgraded its full-year 2026 guidance. Adjusted sales are now projected between $92.5 billion and $93.5 billion, while adjusted EPS expectations have been lifted by $0.10 to a range of $6.70 to $6.90. The free cash flow target remains intact at $8.25 billion to $8.75 billion.
Analysts agree with that, as they see roughly 10% EPS growth this year, a growth rate that is expected to be maintained for the foreseeable future. When adding the secular growth tailwinds
RTX isn’t dirt cheap. It was dirt cheap a few years ago when GTF engine problems caused panic selling. Back then, I called it one of my best ideas. It’s still one of my best ideas, but you now need to pay up to participate.
That’s also why I’m not worried about current weakness, as the market is simply pricing in the Iran War and what this could mean for commercial aviation, while taking some chips off the table after its latest run.
And given the durability of its business model, I think this thing has legs and will continue to trade in the high-20s range, indicating the potential for double-digit annual returns.
Takeaway
RTX is no longer just a “good” aerospace and defense company. Instead, it’s becoming a bottleneck asset in a world defined by scarcity. Structural defense demand, a commercial aftermarket supercycle, and supply chain constraints are converging in its favor.
The 1Q26 data confirms this is not a future story. While valuation is no longer cheap, the combination of pricing power, backlog visibility, and irreplaceable infrastructure supports durable double-digit returns. In this environment, RTX isn’t optional exposure if you ask me.
I’m happily long.