Hey there, bargain hunter.
Wars are good for defense contractors. That’s uncomfortable to say out loud, but it’s the thesis behind RTX right now. The company dropped Q2 2026 results before the open this morning, and the setup walking in was about as favorable as a defense company gets.
Record backlog. Multiple active conflict zones. NATO rearming at a pace not seen since the Cold War. A commercial aerospace cycle that’s still running. Two tailwinds at once is unusual.
What the quarter looked like going in
RTX (NYSE: RTX) entered today with a $271 billion backlog, up 25% year over year. Q1 was already strong: adjusted EPS of $1.78 beat the $1.52 consensus by 17%, and net sales climbed 9% to $22.1 billion. After that result, management raised full-year adjusted sales guidance to $92.5 to $93.5 billion and EPS guidance to $6.70 to $6.90. Free cash flow guidance was set at $8.25 to $8.75 billion for the year.
The Q2 consensus heading into today was $1.66 EPS on revenue of about $22.9 billion, implying roughly 6.2% revenue growth year over year. That’s a deceleration from the 9.4% posted in Q2 2025. RTX has beaten the consensus estimate in each of the trailing four quarters, with an average surprise of around 12.65%. That track record sets expectations, which cuts both ways.
Jefferies was running above consensus, looking for Q2 segment-adjusted EPS of $1.74, a full-year 2026 adjusted EPS of $7.10 versus RTX’s own guidance range, and roughly $8.6 billion in free cash flow for the year.
Three segments, two tailwinds
Raytheon handles missiles and sensors: Patriots, Tomahawks, AMRAAM, Stingers, Standard Missiles. In Q1, Raytheon adjusted operating profit rose 25%, driven by higher volumes on land and air defense programs including Patriot, GEM-T, and naval systems. The company recently booked a $1.1 billion U.S. Navy contract for AIM-9X Block II. RTX and Diehl Defence are also working to increase Stinger production capacity to meet NATO procurement needs. Five long-term framework agreements with the U.S. Department of Defense covering Tomahawk, AMRAAM, and multiple Standard Missile variants have been announced.
The timing of when framework agreements convert to funded, firm contracts matters for when revenue gets recognized. That’s the nuance worth understanding in defense accounting. A big backlog number is not the same as cash in hand. The question today is how fast that $271 billion is converting.
Pratt and Whitney covers jet engines, military and commercial. The GTF Advantage engine is expected to enter commercial service in 2026. Collins Aerospace handles avionics and interiors. Rising flight hours from continued growth in domestic and international air travel are sustaining demand for commercial aircraft aftermarket services — and that commercial aftermarket revenue carries strong margins. Getting both the defense cycle and the commercial aerospace recovery at the same time is what makes RTX’s current position somewhat unusual among large-cap industrials.
The part people skip: supply chain constraints are still a real issue. RTX has said publicly that persistent supply-chain pressure remains a near-term headwind that could affect production schedules and delay revenue recognition despite strong underlying demand. Tariff uncertainty adds friction on the sourcing side. These are the reasons guidance might be maintained rather than raised today even if the quarter beats.
What the market is watching
RTX is up roughly 6.8% year to date heading into this report, outperforming a broader aerospace and defense peer group that is down about 2.8% on average over the last month. Analyst mean price targets are in the $215 to $220 range. The options market was pricing in a move of roughly 5% in either direction heading into today.
Peers have already reported. Northrop Grumman delivered 5.1% revenue growth, beating estimates by 0.5%. AAR reported revenues up 26.1%, topping estimates by 3.9%. The early sector read is constructive. That context is useful for sizing what a beat here actually means.
The company has solid free cash flow discipline, diversified across three large business segments, and a backlog that gives meaningful revenue visibility for years. The commercial aerospace recovery adds an earnings layer that most pure-play defense names don’t have. If you’re looking for a defense name that isn’t entirely dependent on one missile program or one government contract cycle, RTX is a serious answer to that question.
Cheap Investor Scorecard
- Total backlog: $271 billion, up 25% year over year
- Q1 adjusted EPS: $1.78, beat $1.52 consensus by 17%
- Full-year adjusted sales guidance: $92.5B to $93.5B
- Full-year adjusted EPS guidance: $6.70 to $6.90
- Free cash flow guidance: $8.25B to $8.75B for 2026
- Q2 consensus: $1.66 EPS, ~$22.9B revenue
- Average 4-quarter EPS beat: approximately 12.65%
- $1.1B Navy contract for AIM-9X Block II booked
- GTF Advantage engine expected to enter commercial service in 2026
- Supply chain and tariff headwinds remain active risks
The backlog is real. The demand is real. The only open question is whether the supply chain is running fast enough to convert that backlog into the kind of free cash flow that closes the gap to analyst targets. Today’s call answers part of that. The rest plays out over the next two quarters.
