Intrinsic Value RTX Corporation (5UR.DE)

• Previous Close: €167.22
• Intrinsic Value: €49.60
• Upside potential: -70%

Stock Valuation Context

Business Model And Market Position

RTX Corporation operates as a leading aerospace and defense company, serving commercial, military, and government clients globally. The company is structured into three key segments: Collins Aerospace, Pratt & Whitney, and Raytheon, each specializing in distinct yet complementary areas. Collins Aerospace focuses on aviation systems, cabin interiors, and aftermarket services, while Pratt & Whitney is a major supplier of aircraft engines and auxiliary power units. Raytheon delivers advanced threat detection and mitigation solutions, reinforcing RTX's diversified revenue streams across defense and commercial aviation. RTX holds a strong market position due to its technological expertise, long-term government contracts, and extensive aftermarket services, which provide recurring revenue. The company’s integration of defense and commercial aerospace capabilities allows it to capitalize on both military modernization programs and growing global air travel demand. Its scale and innovation in propulsion, avionics, and defense systems make it a critical player in an industry characterized by high barriers to entry and stringent regulatory requirements.

Revenue Profitability And Efficiency

RTX reported revenue of €80.7 billion in FY 2024, with net income of €4.8 billion, reflecting a net margin of approximately 5.9%. Operating cash flow stood at €7.2 billion, though capital expenditures of €3.2 billion indicate significant reinvestment needs. The company’s profitability is tempered by high R&D and operational costs inherent in the aerospace and defense sector, but its diversified portfolio helps stabilize earnings.

Earnings Power And Capital Efficiency

Diluted EPS of €3.68 underscores RTX’s earnings capability, supported by stable demand in defense and cyclical recovery in commercial aerospace. The company’s capital efficiency is moderated by substantial debt (€42.9 billion) and ongoing capex, though its strong cash position (€5.6 billion) provides liquidity. Government contracts and aftermarket services contribute to predictable cash flows, enhancing long-term capital allocation flexibility.

Balance Sheet And Financial Health

RTX’s balance sheet shows €5.6 billion in cash against €42.9 billion in total debt, indicating a leveraged but manageable position. The company’s ability to service debt is supported by steady cash flows from long-term contracts. Its financial health is typical for capital-intensive industrials, with liquidity bolstered by operating cash flow generation and access to capital markets.

Growth Trends And Dividend Policy

Growth is driven by defense spending tailwinds and commercial aerospace recovery, though supply chain risks persist. RTX maintains a shareholder-friendly dividend policy, with a payout of €2.32 per share, offering a moderate yield. Share buybacks or dividend hikes may be constrained by debt reduction and investment priorities in the near term.

Valuation And Market Expectations

With a market cap of €156.9 billion and a beta of 0.59, RTX is viewed as a defensive play in industrials. Current valuation reflects expectations of steady defense revenue and commercial aerospace rebound, though geopolitical and operational risks are priced in. The stock’s low volatility aligns with its stable government-backed revenue streams.

Strategic Advantages And Outlook

RTX’s strategic advantages include technological leadership, entrenched government relationships, and aftermarket service resilience. Near-term challenges include supply chain normalization and engine durability issues, but long-term demand for defense and sustainable aviation solutions remains robust. The company is well-positioned to benefit from global security needs and air travel growth, though execution risks warrant monitoring.

Sources

Company filings, Bloomberg