The Numbers
| Metric | Estimate | Actual | Result |
|---|---|---|---|
| EPS | $1.66 | $1.89 | +13.7% ✅ |
| Revenue | $20.1B | $21.4B | +6.5% ✅ |
| Missiles & Defense | $5.2B | $6.1B | +18% 🔥 |
| Collins Aerospace | $7.8B | $8.1B | +3.8% |
Market Reaction: +7.33% to $209.16 — highest close since Feb 2024. Volume 2.8M (vs avg 1.4M).
Guidance Update
FY 2026 Raised
- EPS: $6.90–$7.10 (was $6.50–$6.70)
- Revenue: $82B–$84B (was $79B–$81B)
- FCF: $5.2B (was $4.8B)
Key Driver: Middle East order influx — defense segment backlog +$12B QoQ.
What Happened
✅ Missiles & Defense Explodes (+18% YoY)
- Patriot interceptors, AMRAAM, Tomahawk — all ramping
- Iran war demand: $8.4B in new orders (classified + public)
- Margins expanded to 13.8% (vs 12.1% Q1)
Why It Matters: M&D is 28% of revenue but 40% of operating profit. This is the crown jewel.
✅ Backlog Hits Record $186B
- Total backlog: $186B (vs $174B Q1) — +$12B QoQ
- Defense backlog alone: $118B (63% of total)
- Book-to-bill ratio: 1.34 (healthy growth trajectory)
Context: Pre-pandemic backlog was ~$140B. This is 30%+ higher.
✅ Collins Aerospace Steady
- Commercial aftermarket +9% (air travel recovery)
- Military systems +12% (pilot training, comms)
- Margins flat at 18.2% — no degradation
⚠️ Pratt & Whitney Still Weak
- GTF engine recall costs: $420M in Q2
- Commercial engine deliveries down 8%
- Mitigation: Defense engine contracts +15%
Bottom Line on P&W: Headwind but manageable. Defense growth + aftermarket offset.
Market Reaction
Stock: RTX closed $209.16, up 7.33% (+$14.27). Options flow showed heavy call buying in Sept $220 strikes.
Peer Comparison:
- LMT: +10.54% (bigger beat, F-35 ramp)
- NOC: +1.56% (no earnings, riding sector wave)
- GD: +2.31% (no earnings, defense proxy)
RTX beat was strong but LMT’s F-35 momentum stole the show.
Why This Matters
1. Iran War = Sustained Demand
If conflict extends (Trump rhetoric suggests months/years), RTX’s missile systems are consumables — every launch needs a replacement. Patriot interceptors alone are $4M/unit.
2. Backlog Provides 2.2 Years of Revenue
$186B backlog ÷ $84B FY revenue = 2.2 years of locked-in work. Even if new orders stop tomorrow, RTX is covered through mid-2028.
3. Defense Mix Improving
Defense now 60% of revenue (up from 55% pre-pandemic). Higher-margin, more predictable than commercial.
4. Margins Expanding
M&D segment hit 13.8% margins (vs 12.1% Q1). Scale + pricing power + mix shift = operating leverage.
Risks
1. Ceasefire Kills Momentum
If Iran war ends abruptly, order flow slows. But backlog still provides multi-year buffer.
2. GTF Recall Costs
P&W engine issues could worsen. Current estimate: $1.2B total impact through 2027. If that doubles, it erodes 5-10% of EPS.
3. Valuation Catch-Up
RTX trades at P/E ~24 (vs LMT ~35). Either RTX is cheap or LMT is expensive. Market favors LMT’s F-35 story.
4. Execution Risk
Ramping production 18% YoY = supply chain stress. Any Tier 2/3 supplier failure = delivery delays.
Bottom Line
Massive beat driven by Iran war orders. Backlog at $186B (record), margins expanding, guidance raised. Stock ran 7.3% but still has room — if Iran conflict sustains, RTX has multi-year visibility. M&D segment is the story; P&W is a drag but not fatal.
Comp: RTX is cheaper than LMT (P/E 24 vs 35) but LMT has F-35 momentum. If you want pure missile/defense exposure, RTX is the pick. If you want platform diversity (fighters, helicopters, missiles), LMT wins.
Entry: Stock already ran. Wait for pullback to $200 or buy calls on dips. Resistance at $215, then $225.
Next Catalyst: Iran escalation over weekend. Pentagon budget discussions in Aug could add upside to FY27 estimates.
Peer Watch: NOC reports Aug 1. If they also beat on defense, entire sector re-rates higher.