RTX's Stock Valuation Looks Promising Amid Industry Growth

RTX shows strong potential for investors in 2025. The aerospace and defense firm benefits from production growth and a solid backlog, marking it as a compelling investment option.

Date: 15-03-2025

AI Rating: 7

**Earnings Before Interest and Taxation (EBIT)**: RTX's EBIT is expected to grow from $8.9 billion in 2023 to $11 billion in 2025, indicating a growth rate of 8.2% in 2025. This points to a stable growth outlook for the firm. **Free Cash Flow (FCF)**: Free Cash Flow is projected to rise significantly from $5.5 billion in 2023 to $7.1 billion in 2025, reflecting a dramatic increase in free cash flow by 57.6% during that period. The anticipated FCF of $7.1 billion in 2025, which is likely to improve to about $8.35 billion when accounting for remediation costs associated with the GTF engine, places RTX at approximately 20.5 times FCF. This would indicate a favorable valuation, considering the standard industrial valuation multiple is around 20 times FCF. **Backlog and Market Demand**: RTX is experiencing a noteworthy increase in its backlog, currently amounting to $218 billion and a defense backlog of $93 billion. This growth underlines a robust demand outlook bolstered by heightened defense spending and recovery in commercial aerospace driven by increased flight departures and production ramp-ups by Boeing and Airbus. **Potential Risks**: However, it's critical to monitor geopolitical factors and government spending patterns, especially any reductions in U.S. defense budget allocations that could impact future orders. The mention of potential negotiations tightening could foreshadow profit margin challenges, affecting long-term revenue predictability. Overall, despite the caveats associated with defense spending and geopolitical climate, the data suggests a strong near- to medium-term outlook for RTX, complemented by an attractive valuation. Hence, the attributes of RTX suggest it could be an appealing investment opportunity.

Stocks: RTX