RTX Corp. RTX is slated to release first-quarter 2025 results on April 22, before the opening bell.  

The Zacks Consensus Estimate for first-quarter revenues is pegged at $19.76 billion, implying 2.4% growth from the year-ago quarter's reported figure. The consensus mark for first-quarter earnings is pegged at $1.33 per share, suggesting no change from the prior-year quarter’s reported figure. The bottom-line estimate has also remained unchanged in the past 60 days. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Image Source: Zacks Investment Research

RTX, a prominent U.S. defense contractor, has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.92%.

Image Source: Zacks Investment Research

Earnings Whisper for RTX Stock

Our proven model predicts an earnings beat for RTX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is also the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

RTX has a Zacks Rank #3 and an Earnings ESP of +3.76% at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors to Consider for RTX’s Q1 Results

Growing Commercial Sales: A Key Growth Catalyst

Steadily increasing domestic and international commercial air traffic, resulting in increased flight hours, has been consistently boosting aftermarket demand for commercial jets over the past few quarters. This trend, expected to have prevailed in the first quarter of 2025 as well, must have bolstered RTX’s commercial aftermarket sales across each of its aftermarket sales channels in the soon-to-be-reported quarter.

On the other hand, an increased demand for commercial passenger and business jets, buoyed by improving commercial air passenger travel rates, is likely to have boosted deliveries of jet engines from Pratt & Whitney. In particular, high sales volume for large commercial engines, especially the GTF engine shipments, is expected to have contributed favorably to RTX’s commercial original equipment manufacturer (OEM) sales.

Such impressive sales growth expectations from commercial OEM and aftermarket businesses might have cumulatively boosted the top-line projections for both Pratt & Whitney and Collins Aerospace segments.

The Zacks Consensus Estimate for Pratt & Whitney’s first-quarter adjusted sales is pegged at $6,873.7 million, indicating an improvement of 6.5% from the year-ago quarter’s reported figure. The consensus mark for Collins Aerospace’s adjusted sales is pinned at $6,869.9 million, indicating a 3% increase from the prior-year quarter’s level.

Solid Outlook for Military Sales

Growing geopolitical hostilities have been playing the role of a key growth catalyst for defense contractors like RTX. Notably, higher sales volume for the company’s land and air defense systems, including Global Patriot, NASAMS and counter-unmanned aerial systems programs, can be expected to have bolstered its first-quarter 2025 military sales.  Higher volume of F135 production, the F135 engine core upgrade program and F135 sustainment must have boosted this unit’s top-line performance.

Other Factors at Play

Strong sales performance from the majority of RTX’s businesses, as mentioned above, might have boosted the company’s overall revenues.

Factors like solid sales expectations, profit from higher commercial aftermarket at Pratt & Whitney as well as Collins Aerospace, higher defense volume, improved net productivity, along with lower interest expenses are expected to have bolstered RTX’s earnings. 

However, higher corporate expenses from investment in RTX’s digital systems and capabilities and higher taxes might have affected the company’s bottom-line performance to some extent. 

Price Performance & Valuation

RTX’s shares have exhibited an upward trend, gaining a notable percentage over the year-to-date period. Specifically, the stock has surged 11.7%, outperforming the Zacks aerospace-defense industry’s rise of 2.7% and the Zacks Aerospace sector’s growth of 1.7%. It has also outpaced the S&P 500’s decline of 8.6% over the year-to-date period.

Image Source: Zacks Investment Research

Other notable stocks from the same industry have, however, performed poorly year to date and lagged RTX’s performance. Shares of The Boeing Company BA and Textron TXT have lost 11.6% and 15%, respectively.  

From a valuation perspective, RTX is trading at a premium when compared to its industry. Currently, RTX is trading at 2.01X forward 12-month price/sales, which is higher than the industry’s forward 12-month price/sales multiple of 1.88. Also, its five-year median is 1.85X. So, the company’s valuation looks stretched compared with the mid-point of its own range.

RTX’s Price-to-Sales (Forward 12 Months)

Image Source: Zacks Investment Research

However, its industry peers are currently trading at a discount. While the forward 12-month price/sales multiple for Boeing is 1.34, the same for Textron is 0.80.

Investment Thesis

As we witness heightened geopolitical tensions across the globe due to a significant spike in cross-border disputes like Iran-Israel and civil unrest in different parts of the world lately, growing demand for defense products continues to play a vital role in boosting sales growth for prominent defense contractors like RTX and Boeing.

Expanding commercial air traffic worldwide also remains a major growth catalyst for RTX, with more than 13,000 of its large commercial engines installed globally. We may expect the company’s first-quarter results to duly reflect these growth trends in terms of notable revenue and earnings growth. 

Textron, a supplier of some major business jets like Cessna, has also been benefiting from the growing commercial air traffic worldwide.

Backed by its solid top-line prospects, the company has been offering notable rewards to its shareholders. RTX’s dividend yield is 1.96% compared with the S&P 500’s 1.37%. 

However, the company’s return on equity (ROE) was lower than that of its peer group. This indicates that RTX is not effectively using its shareholders' equity to generate profits compared to its Peer Group. 

RTX’s ROE

Image Source: Zacks Investment Research

Should You Buy RTX Stock Before Q1 Earnings Release?

RTX is less likely to disappoint with its first-quarter results, considering the year-over-year growth reflected in its sales and earnings estimates, a favorable Zacks Rank and a positive Earnings ESP. However, considering its premium valuation and low ROE, investors interested in buying this stock should wait until next Tuesday. Nevertheless, those who already own it may continue to do so, considering its rewarding dividend yield.




 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Boeing Company (BA) : Free Stock Analysis Report

Textron Inc. (TXT) : Free Stock Analysis Report

RTX Corporation (RTX) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research