New RTX Price Target as Israel-Iran Strikes Lift Defense Stocks
The former Raytheon Technologies is seeing robust relative strength without being overbought.
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Obviously, the morning after the Israeli Defense Forces launched what now appears to be a serious campaign against Iran's military leadership and potential for offensive nuclear capabilities, defense and aerospace stocks are as hot as a pistol.
Some of these stocks have been struggling as the U.S. Department of Defense considers budget cuts, despite what looks like a global trend towards increased spending on security.
Just this week, the U.S. Air Force cut back on how many F-35 fighter jets it wished to order from Lockheed Martin LMT. That stock had not done well of late. Other chunks of defense spending have been diverted toward the technology/big data/generative AI space, hence the rise in significance of Palantir Technologies PLTR and some lesser players in that space.
However, the shares of one legacy large defense contractor have remained on track. It's a name that I have given readers repeatedly even after cutting back on allocations toward some competitors and even exiting others completely. That one stock that I have been sticking to, and even increasing exposure to this year, has been the old Raytheon Technologies, which is simply now known as RTX RTX.
RTX Corporation
RTX Corporation is what remains after the old Raytheon Technologies merged with the old United Technologies in April 2020. United Technologies spun off both Carrier Global CARR and Otis Worldwide OTIS ahead of that merger as heating/AC and elevators were not core to the defense and aerospace industries.
The current RTX operates through three segments:
- Collins Aerospace: Provider of advanced aerospace and defense products and after-market solutions to civil and military aircraft manufacturers and commercial airlines as well as commercial space operators.
- Pratt & Whitney: Supplier of aircraft engines to commercial, military and business aviation customers. Key competitor to GE Aerospace GE.
- Raytheon: Provider of defensive and offensive threat detection services as well as tracking and mitigation capable technologies to the United States armed forces and U.S. allies. Raytheon develops and provides advanced capabilities to the U.S. and U.S. allies in the areas of missiles, missile defense and smart weapons.
Key Defense Products
RTX is the primary contractor behind a number of key defense products that readers may or may not have heard of.
- Air to Air Missiles: Sidewinder, AMRAAM (multi-target), Sparrow, Phoenix
- Air to Surface Missiles: Maverick, HARM, JSOW
- Anti-Ship Missiles: ESSM
- Surface to Air Missiles: Patriot, Hawk, Sea Sparrow
- Cruise Missiles: Tomahawk
- Anti-Tank Missiles: TOW, Javelin
- Guided Missiles: Griffin, Stinger
Among many other programs that RTX either leads or participates in would be the THAAD missile defense system, AMDR missile defense radar for U.S. Naval vessels, Iron Dome short-range missile defense, Excalibur guided artillery rounds, Paveway laser-guided bombs, the Aegis Fire Control system and a next generation mid-band jammer for electronic warfare purposes.
Performance
For the firm's first quarter, which was reported back in April, RTX beat Wall Street quite decisively on both adjusted earnings and revenues, while sporting sales growth of 5.2%. The firm reaffirmed its full year outlook at the time, which included free cash flow of $7 billion to $7.5 billion. Wall Street is projecting 5% sales growth for RTX in 2025 and then 12% sales growth for full year 2026.
The Chart
Readers will see that RTX came out of a double-top pattern of bearish reversal that stretched from late January through late March and that sell-off led directly into a double-bottom pattern of bullish reversal with a $131 pivot.
The stock has taken back its 200-day and 50-day SMAs as well as its 21-day EMA. This has forced portfolio managers to increase long-side exposure while also getting the swing crowd on board. Relative strength is quite robust, but not yet technically overbought.
Below the chart, readers can see that the daily MACD is still postured very bullishly. Within that indicator, the histogram of the nine-day EMA is above zero, while the 12-day EMA is riding above the 26-day EMA with both of those lines well into positive territory.
RTX Corporation (RTX)
Target Price: $163
Pivot: $131
Add: Down to 50-day SMA
Panic: Loss of 200-day SMA
At the time of publication, Guilfoyle was long RTX, PLTR and GE equity.
