RTX (RTX) could deliver stronger revenue, margins and free cash flow through 2027 as defense orders rise, commercial aerospace demand stays firm, Pratt & Whitney improves engine servicing and Collins cuts costs, Morgan Stanley said in a note Friday.

The investment firm said RTX's record $289 billion backlog and strong demand for aircraft parts, maintenance services, missiles and air defense systems should support continued growth, with Raytheon to provide the largest earnings upside, helped by its $86 billion backlog, rising international orders and five missile defense agreements that have not yet entered the backlog.

Pratt & Whitney could benefit from higher aftermarket sales as engine repair output improves, service times fall and fewer aircraft remain grounded, Morgan Stanley said, adding that Collins could also lift earnings as higher aircraft production and cost reductions help margins move toward 19% to 20% over time.

The 2026 adjusted earnings estimate was raised to $7.25 per share from $6.90 and increased its 2027 and 2028 forecasts to $7.85 and $8.50 per share, respectively, according to the note.

Morgan Stanley maintained the company's overweight rating and raised its price target to $240 from $220.

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