On October 3, Deutsche Bank upgraded RTX Corp (NYSE: RTX) from Sell to Hold, raising its price target from $109 to $129.
This upgrade reflects the bank’s confidence in RTX’s potential to outpace its defense-industry peers, primarily due to its substantial aviation business.
Despite lowering earnings estimates to account for slower growth at major aircraft manufacturers Boeing and Airbus, Deutsche Bank analysts believe RTX is well-positioned for accelerated growth in the aviation sector.
Recent developments bolstering RTX’s position
RTX’s aviation units, Pratt & Whitney and Collins Aerospace, have recently secured significant contracts that enhance the company’s growth prospects.
Pratt & Whitney was awarded a contract valued at up to $1.3 billion to continue work on the F135 Engine Core Upgrade, aimed at improving engine durability.
Jill Albertelli, president of Pratt & Whitney’s Military Engines business, emphasized the contract’s importance in advancing design maturation and preparing the supply base for production.
Additionally, the U.S. State Department approved a $7.2 billion sale of 32 F-35A Joint Strike Fighters to Romania.
This deal includes F135 engines made by Pratt & Whitney, expanding RTX’s international footprint and strengthening its defense segment.
These developments come amid rising geopolitical tensions, notably Iran’s recent missile attack on Israel, which has led to increased demand for defense equipment from companies like RTX.
RTX Corp: strong fundamentals and earnings expectations
RTX has been focusing on enhancing efficiency and operational performance across its business units.
CEO Christopher Calio stated that the company aims to make its businesses more interconnected rather than pursuing transformative mergers or acquisitions.
This strategy is expected to optimize the company’s substantial backlogs, especially as the aerospace industry continues its recovery.
Analysts anticipate RTX to report GAAP earnings per share of $1.04 on revenue of $19.84 billion for the upcoming quarter.
This represents a significant improvement compared to a loss of $0.68 per share on revenue of $13.46 billion in the same quarter of the previous year.
However, it’s noteworthy that 15 out of 18 analysts have revised their EPS estimates downward in the last 90 days, indicating cautious optimism.
BofA is also bullish on RTX
Investment banks have provided favorable ratings and increased price targets for RTX, reflecting confidence in its future earnings potential.
Bank of America Securities upgraded RTX to Buy from Neutral and raised its price target to $140 per share from $110, basing this valuation on an enterprise value that is 14 times the estimated EBITDA for 2025.
This suggests that RTX is reasonably valued relative to its projected earnings growth.
The company’s consistent dividend growth, boasting a five-year compound annual growth rate of 5.7%, along with a strong commitment to shareholder returns through dividends and share repurchases, enhances its appeal to investors.
RTX’s strategic focus on core business efficiencies over transformative acquisitions is expected to drive sustainable growth and shareholder value.
With a series of strategic upgrades, robust contract wins, and positive outlooks from major financial institutions, RTX presents a compelling case for investors.
The company’s strong fundamentals and growth initiatives suggest the potential for upward movement.
Now, let’s turn to the technical aspects to better understand the stock’s price trajectory and assess how the charts reflect these developments.
RTX stock: new all-time highs
RTX’s stock saw a significant decline of close to 30% in the second half of last year amid issues related to engines manufactured by its Pratt & Whitney division.
However, after dropping below $70, the stock has witnessed a strong rally since October 2023 that lasts to this day.
Source: TradingView
On October 2, the stock made its all-time high at $125.53 and is displaying strong upward momentum across all timeframes, but this has also resulted in several technical indicators crossing into the overbought territory.
Hence, investors willing to go long RTX must ideally wait for a retracement or a period of consolidation and must aim to buy it below $120 levels for a target of $142 levels if the tension in the Middle East persists.
Traders who have a bearish outlook must not short it at current levels because of the strong upward momentum. A short position must only be considered if the stock falls below its recent swing low of $109.45.
The post Deutsche Bank upgrades RTX: should you hold for the $129 target? appeared first on Invezz
