Al Root

Shifting global alliances, budgetary concerns, and leadership turnover at the Pentagon have created some volatility for the defense sector early in President Donald Trump's second term.

Still, his position is peace through strength. Trump wants a strong military deploying new weapons technology cheaply and quickly. RTX is one beneficiary of that stance, according to Benchmark analyst Josh Sullivan.

On Wednesday, he upgraded RTX shares to Buy from Hold and established a new $140 price target for the stock. RTX is a "play on peace through strength," wrote Sullivan.

His target values RTX shares at about 20 times his 2026 earnings per share estimate of $6.95. The Wall Street consensus number is $6.70, according to FactSet.

Despite the upgrade, RTX stock was down 0.6% at $129.94 in early trading, while the S&P 500 was off 0.1% and the Dow Jones Industrial Average was flat. Coming into Wednesday trading, RTX stock was up about 10% since the Nov. 5 presidential election, beating the S&P 500 by about eight percentage points.

"Trump's recent Saudi visit included a reported $142 billion arms package with the CEOs of several Defense Primes in [Saudi Arabia] simultaneously," added Sullivan. "The deal is anticipated to have included several areas where RTX has significant exposure, including air and missile defense, air force and space advancement, and communications."

The Saudi deal comes after the president's initial request for a $1 trillion defense budget for fiscal 2026. That would represent an increase of about 13%.

Sullivan pointed out that the outlook in commercial aerospace, a second essential market for the company, remains solid. About 60% of RTX's sales go to customers other than the U.S. government.

Overall, 70% of analysts covering RTX stock rate the shares at Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average price target is about $138.

Write to Al Root at allen.root@dowjones.com

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May 14, 2025 10:18 ET (14:18 GMT)

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