◆ What the Market Isn't Pricing In

RTX (RTX) — the variant view

RTX is cheaper on cash than on reported earnings, but the market's optimism rests on Pratt & Whitney's margin rising, and that has not happened yet.

📈 RTX valuation, revenue & earnings — P/E, P/S, revenue, EPS →

The headline multiple overstates what investors pay for RTX's cash. Reported earnings carry about $2 billion a year of amortization from past acquisitions1, a non-cash charge. Free cash flow was $7,940 million in 20252, above net income of $6,732 million3. On trailing free cash flow the shares trade at about 22 times4, not 33.

RTX valuation multiples, September 2026 (times)33.3Trailing P/E25.7Forward P/E, adjusted22.4Price to free cash flowstockanalysis statistics, 25 September 2026
Cheaper on cash than on earnings.

The backlog adds visibility the multiple does not reward. RTX had $289 billion of work under contract in June 20265, about three years of sales6, and it raised its 2026 free cash flow guidance to $8.50 to $8.75 billion7.

What the market may be underweighting in the other direction is Pratt & Whitney's margin. The segment is RTX's largest, with $32,916 million of sales in 2025, and it earned 7.9%89. GE Aerospace's commercial engine segment earned 26.6%10. If Pratt stays in single digits, RTX's largest business will remain its weakest, and the company's return on capital will struggle to pass its cost.

So there are two errors available. The optimist extrapolates the defence upcycle and ignores the engine margin; the pessimist reads the 33 times earnings and ignores the cash.

The enterprise value makes the same point. Including debt, RTX is valued at $285.82 billion11, about 3.1 times trailing sales of $93.5 billion12. Analysts expect 2026 revenue of $96.15 billion and adjusted earnings of $7.24 a share13, which would put the shares at about 26 times this year's adjusted earnings, the figure most investors are actually using.

There is also a quieter drag the market may be missing: pension income is shrinking. The FAS/CAS adjustment fell from $1,654 million in 2021 to $753 million in 20251415, and non-service pension income from $1,780 million in 2023 to $1,182 million16. The segments have to outgrow a falling cushion before any of their improvement reaches the bottom line.

The shares are about 16.5% below their 52-week high1718. The reconciling number is Pratt & Whitney's operating margin; above 10% by 2027 would justify the price on both earnings and cash, and a stall near 8% would leave the multiple resting on defence alone.

References
  1. ReportedReported earnings carry about $2 billion a year of amortization from past acquisitions, a non-cash charge.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - totals across segments: segment sales and profit, eliminations, acquisition accounting and FAS/CAS adjustments. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  2. ReportedFree cash flow was $7,940 million in 2025, above net income of $6,732 million.
    RTX fourth-quarter and full-year 2025 earnings release, Form 8-K exhibit 99 - adjusted EPS of $6.29, free cash flow of $7,940 million, adjusted segment results and the January 2026 outlook. — FY2025 · publ. 27 January 2026 · source ↗
  3. ReportedFree cash flow was $7,940 million in 2025, above net income of $6,732 million.
    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 ↗
  4. ReportedOn trailing free cash flow the shares trade at about 22 times, not 33.
    RTX statistics - PE ratio 33.34, forward PE 25.68, PS ratio 2.73, P/FCF 22.38, enterprise value $285.82B, dividend yield 1.54%, payout ratio 51.41%. — September 2026 · publ. 25 September 2026 · source ↗
  5. ReportedRTX had $289 billion of work under contract in June 2026, about three years of sales, and it raised its 2026 free cash flow guidance to $8.50 to $8.75 billion.
    RTX Form 10-Q for the quarter ended 30 June 2026 - backlog of $289 billion ($170 billion commercial, $119 billion defence), remaining performance obligations, the $0.4 billion powder-metal accrual, the Blue Canyon Technologies sale, Patriot awards and the remaining repurchase authority. — Q2 2026 · publ. 23 July 2026 · source ↗
  6. Moat Explorer calcRTX had $289 billion of work under contract in June 2026, about three years of sales, and it raised its 2026 free cash flow guidance to $8.50 to $8.75 billion.
    Moat Explorer calculation from RTX's Forms 10-K FY2023-FY2025, Form 10-Q Q2 2026 and Q2 2026 earnings call. GTF aircraft: more than 2,600 against more than 1,700, about 900 more, 2,600 / 1,700 - 1 = 53%; operators 70 to over 90. Raytheon backlog 86 / 52 - 1 = 65% (December 2023 to June 2026); 86 / 28.043 = 3.1 years of 2025 sales. Total backlog 289 / 93.5 = 3.1 years of trailing sales. Pratt & Whitney share of backlog 151 / 268 = 56% (December 2025). Commercial share of backlog 170 / 289 = 59%; defence 119 / 289 = 41% (June 2026). Defence backlog 119 / 78 - 1 = 53% (December 2023 to June 2026). Government share of 2025 net sales (33,279 + 6,702 + 6,123) / 88,603 = 46,104 / 88,603 = 52%; foreign governments 6,702 + 6,123 = 12,825, 12,825 / 88,603 = 14.5%. — 2023-2026 · 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. ReportedRTX had $289 billion of work under contract in June 2026, about three years of sales, and it raised its 2026 free cash flow guidance to $8.50 to $8.75 billion.
    RTX second-quarter 2026 earnings release, Form 8-K exhibit 99 - sales of $24.7 billion, segment results, cash flow, balance sheet and raised 2026 outlook. — Q2 2026 · publ. 23 July 2026 · source ↗
  8. ReportedThe segment is RTX's largest, with $32,916 million of sales in 2025, and it earned 7.9%.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - totals across segments: segment sales and profit, eliminations, acquisition accounting and FAS/CAS adjustments. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  9. Moat Explorer calcThe segment is RTX's largest, with $32,916 million of sales in 2025, and it earned 7.9%.
    Moat Explorer calculation from RTX's segment results (Forms 10-K FY2023 and FY2025, Q2 2026 earnings release; $ millions). Operating margins: Collins 2,380 / 21,152 = 11.3% (2021), 2,816 / 23,052 = 12.2% (2022), 4,923 / 30,196 = 16.3% (2025), H1 2026 2,613 / 15,812 = 16.5%, Q2 2026 1,306 / 8,210 = 15.9%, Q1 2026 (first half less Q2) 1,307 / 7,602 = 17.2%; Pratt & Whitney 454 / 18,150 = 2.5% (2021), 1,075 / 20,530 = 5.2% (2022), 2,015 / 28,066 = 7.2% (2024), 2,596 / 32,916 = 7.9% (2025), H1 2026 1,448 / 17,062 = 8.5%, Q2 2026 738 / 8,889 = 8.3%; Raytheon 3,399 / 26,611 = 12.8% (2021), 2,448 / 25,176 = 9.7% (2022), 2,379 / 26,350 = 9.0% (2023), 3,227 / 28,043 = 11.5% (2025), Q2 2026 1,042 / 8,269 = 12.6%; Q1 2026 Raytheon sales 15,214 - 8,269 = 6,945. Growth 2021-2025: Collins 30,196 / 21,152 - 1 = 43% (about 9% a year), operating profit 4,923 / 2,380 = 2.07 times; Pratt & Whitney 32,916 / 18,150 - 1 = 81%, 2025 32,916 / 28,066 - 1 = 17%; Raytheon 28,043 / 26,611 - 1 = 5%. 2025 shares of segment sales (91,155): Pratt & Whitney 36%, Collins 33%, Raytheon 31%; of segment operating profit (10,746): Collins 4,923 = 45.8%, Raytheon 3,227 = 30.0%, Pratt & Whitney 2,596 = 24.2%. Operating profit over segment assets 2025: Collins 4,923 / 71,680 = 6.9%, Raytheon 3,227 / 44,795 = 7.2%, Pratt & Whitney 2,596 / 52,482 = 4.9%. Pratt & Whitney services share 14,449 / 32,916 = 44%; services growth 14,449 / 9,717 = 1.49 times. Collins commercial share 18,858 / 27,585 = 68%; Collins government sales 7,061 + 436 + 1,230 = 8,727, 8,727 / 27,585 = 32%. Raytheon U.S. government share 19,237 / 27,892 = 69%. Collins services share 6,118 / 27,585 = 22%. Pratt & Whitney segment assets 52,482 / 44,307 - 1 = 18%. Pratt & Whitney 2025 defence bookings other than F135: about 9.0 - 2.9 - 2.4 = 3.7 billion. GE Aerospace Commercial Engines & Services profit 8,861 against Pratt & Whitney 2,596: 3.4 times; margins 26.6% against 7.9%. — 2021-2026 · 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.
  10. ReportedGE Aerospace's commercial engine segment earned 26.6%.
    GE Aerospace Form 10-K for fiscal 2025 - Commercial Engines & Services segment revenue of $33,314 million and segment profit of $8,861 million, a 26.6% segment profit margin. — FY2025 · publ. January 2026 · source ↗
  11. ReportedIncluding debt, RTX is valued at $285.82 billion, about 3.1 times trailing sales of $93.5 billion.
    RTX statistics - PE ratio 33.34, forward PE 25.68, PS ratio 2.73, P/FCF 22.38, enterprise value $285.82B, dividend yield 1.54%, payout ratio 51.41%. — September 2026 · publ. 25 September 2026 · source ↗
  12. Moat Explorer calcIncluding debt, RTX is valued at $285.82 billion, about 3.1 times trailing sales of $93.5 billion.
    Moat Explorer calculation from RTX's Form 10-K FY2025, Q2 2026 earnings release and market data ($ 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.
  13. Third-party estimateAnalysts expect 2026 revenue of $96.15 billion and adjusted earnings of $7.24 a share, which would put the shares at about 26 times this year's adjusted earnings, the figure most investors are actually using.
    RTX analyst forecast - 2026 revenue $96.15B and adjusted EPS $7.24; 2027 revenue $103.18B and EPS $7.85. — 2026-2027 · publ. September 2026 · source ↗
  14. ReportedThe FAS/CAS adjustment fell from $1,654 million in 2021 to $753 million in 2025, and non-service pension income from $1,780 million in 2023 to $1,182 million.
    RTX Form 10-K for fiscal 2023 - the three-segment recast of 2021-2022, the GTF family powering more than 1,700 aircraft for 70 operators, backlog of $196 billion, the Carrier and Otis separation and Chinese sanctions on Raytheon Missiles & Defense. — FY2023 · publ. February 2024 · source ↗
  15. ReportedThe FAS/CAS adjustment fell from $1,654 million in 2021 to $753 million in 2025, and non-service pension income from $1,780 million in 2023 to $1,182 million.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - totals across segments: segment sales and profit, eliminations, acquisition accounting and FAS/CAS adjustments. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  16. ReportedThe FAS/CAS adjustment fell from $1,654 million in 2021 to $753 million in 2025, and non-service pension income from $1,780 million in 2023 to $1,182 million.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  17. Moat Explorer calcThe shares are about 16.5% below their 52-week high.
    Moat Explorer calculation from RTX's Form 10-K FY2025, Q2 2026 earnings release and market data ($ 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.
  18. ReportedThe shares are about 16.5% below their 52-week high.
    RTX Corporation (RTX) market data - $189.40 a share at the close on 25 September 2026, market cap $255.27B, revenue (ttm) $93.50B, net income $7.74B, EPS $5.68, 23 analysts with a $234.82 target, 52-week range $155.64-$226.88. — September 2026 · publ. 25 September 2026 · source ↗
Sources
Generated September 28, 2026