⚠ A Quarter Point Moves $1 BillionLow threat

RTX (RTX) — threat to the moat

A quarter-point change in interest rates moves RTX's pension obligation by about $1 billion, a risk unrelated to its business.

RTX's pension plans are large enough to move its balance sheet on a change in interest rates. The 2025 filing estimates that a 25 basis point change in the discount rate would move the projected benefit obligation by about $975 million to $1,017 million1, and a 25 basis point change in the expected return on assets would move pension income by about $130 million2.

Non-service pension income ($M)1,78020231,51820241,1822025RTX Form 10-K FY2025
Down a third in two years.

That sensitivity is outside the company's control. Falling rates raise the obligation; weak markets cut the return. Neither says anything about aircraft or missiles.

The 2025 buy-out, about $2.5 billion transferred with a charge of about $300 million3, reduced the risk at a cost. Further transfers would reduce it more.

The sensitivity is large against RTX's equity. Shareowners' equity was $65,245 million at the end of 20254, so a single percentage point move in the discount rate would shift the obligation by roughly $4 billion5, about 6% of equity6. Rates, not factories, can move the balance sheet this much.

Keep an eye on the non-service pension income line. It fell from $1,780 million in 2023 to $1,182 million in 20257; a further fall below $1 billion would take a visible slice out of earnings that the operating segments must replace.

References
  1. ReportedThe 2025 filing estimates that a 25 basis point change in the discount rate would move the projected benefit obligation by about $975 million to $1,017 million, and a 25 basis point change in the expected return on assets would move pension income by about $130 million.
    RTX Form 10-K for fiscal 2025 - Item 1A risk factors: competition on price, delivery and technology; customers buying parts from suppliers other than the original equipment manufacturer; discounts and guarantees to win engine positions; new defence entrants; GTF durability; reputational harm; pension sensitivity to the discount rate; tariffs. — FY2025 · publ. 6 February 2026 · source ↗
  2. ReportedThe 2025 filing estimates that a 25 basis point change in the discount rate would move the projected benefit obligation by about $975 million to $1,017 million, and a 25 basis point change in the expected return on assets would move pension income by about $130 million.
    RTX Form 10-K for fiscal 2025 - Item 1A risk factors: competition on price, delivery and technology; customers buying parts from suppliers other than the original equipment manufacturer; discounts and guarantees to win engine positions; new defence entrants; GTF durability; reputational harm; pension sensitivity to the discount rate; tariffs. — FY2025 · publ. 6 February 2026 · source ↗
  3. ReportedThe 2025 buy-out, about $2.5 billion transferred with a charge of about $300 million, reduced the risk at a cost.
    RTX Form 8-K of 13 November 2025, Item 8.01 - transfer of about $2.5 billion of pension obligations for about 60,000 retirees to Prudential. — November 2025 · publ. 13 November 2025 · source ↗
  4. ReportedShareowners' equity was $65,245 million at the end of 2025, so a single percentage point move in the discount rate would shift the obligation by roughly $4 billion, about 6% of equity.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  5. ReportedShareowners' equity was $65,245 million at the end of 2025, so a single percentage point move in the discount rate would shift the obligation by roughly $4 billion, about 6% of equity.
    RTX Form 10-K for fiscal 2025 - Item 1A risk factors: competition on price, delivery and technology; customers buying parts from suppliers other than the original equipment manufacturer; discounts and guarantees to win engine positions; new defence entrants; GTF durability; reputational harm; pension sensitivity to the discount rate; tariffs. — FY2025 · publ. 6 February 2026 · source ↗
  6. Moat Explorer calcShareowners' equity was $65,245 million at the end of 2025, so a single percentage point move in the discount rate would shift the obligation by roughly $4 billion, about 6% of equity.
    Moat Explorer calculation from RTX's Form 10-K FY2025, Q2 2026 earnings release and market data ($ millions unless stated). Goodwill plus intangibles 53,343 + 31,845 = 85,188; 85,188 / 171,079 = 49.8% of total assets; other assets 171,079 - 85,188 = 85,891. Reported against adjusted EPS 2025: 6.29 - 4.96 = 1.33, of which 1.15 acquisition accounting. Return on equity 6,732 / ((65,245 + 60,156) / 2) = 10.7%. Net debt: 37,700 + 204 - 7,435 = 30,469 (December 2025); 31,858 + 5,296 + 229 - 8,305 = 29,078 (June 2026). Net interest 1,749 / operating profit 9,300 = 18.8%. Dividends paid 3,574 / free cash flow 7,940 = 45%; free cash flow covers dividends 7,940 / 3,574 = 2.2 times. Pension items 753 + 1,182 = 1,935; 1,935 / net income 6,732 = 29%. Trailing twelve months to June 2026: revenue 88,603 + 46,784 - 41,887 = 93,500; net income 6,732 + 4,198 - 3,192 = 7,738. P/E 255.27 / 7.738 = 33.0; P/S 255.27 / 93.50 = 2.73. Year-end P/E = market value / net income and P/S = market value / revenue: 2021 128.81 / 3.864 = 33.3 and 128.81 / 64.388 = 2.00; 2022 148.36 / 5.197 = 28.5 and 2.21; 2023 120.99 / 3.195 = 37.9 and 120.99 / 68.920 = 1.76; 2024 154.03 / 4.774 = 32.3 and 1.91; 2025 245.90 / 6.732 = 36.5 and 2.78; 2020 108.60 / 56.587 = 1.92 (loss year). Revenue growth since 2023: 93.50 / 68.92 - 1 = 36%; market value 255.27 / 120.99 = 2.1 times. Share price against 52-week high 189.40 / 226.88 - 1 = -16.5%. Peers: Lockheed Martin plus General Dynamics 121.09 + 92.75 = 213.84 (below RTX's 255.27); RTX / Northrop Grumman 255.27 / 73.08 = 3.5 times. Q2 2026 operating margin 2,811 / 24,708 = 11.4%. Price over 2025 adjusted EPS 189.40 / 6.29 = 30 times. 2024 legal and termination cash 1.5 / free cash flow 4.534 = 33%. Pension sensitivity about 1.0 billion per 25 basis points, so about 4 billion per point; 4,000 / equity 65,245 = 6%. Enterprise value over trailing sales 285.82 / 93.50 = 3.1 times; price over 2026 consensus adjusted EPS 189.40 / 7.24 = 26 times. Purchase obligations after 2026 about 47 - 29 = 18 billion. Forecast extension: 2028 revenue 103.18 x 1.07 = 110.40 and EPS 7.85 x 1.084 = 8.51, extending 2027 consensus growth (not consensus). — 2020-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in RTX's Forms 10-K and 10-Q, earnings releases, earnings call and market data; operands shown in the source line.
  7. ReportedIt fell from $1,780 million in 2023 to $1,182 million in 2025; a further fall below $1 billion would take a visible slice out of earnings that the operating segments must replace.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
Sources
Generated September 28, 2026