RTX to Lead Engine Integration for JetZero: To Buy or Hold the Stock?

RTX Corp. RTX has recently signed three agreements with JetZero to supply critical systems for the latter’s new, blended-wing body demonstrator plane.  Under these agreements, RTX’s Pratt & Whitney unit will integrate its PW2040 engine, while its Pratt & Whitney Canada unit will provide the APS3200 APU. The company’s Collins Aerospace business will design and build nacelle structures, leveraging its extensive experience in major commercial aircraft programs.This collaboration reinforces RTX’s leadership in aerospace innovation, potentially boosting its position in next-generation aviation. This, in turn, may attract investors interested in the commercial aviation industry to add RTX stock to their portfolio. However, before making any hasty investment decision, it's essential to assess how the company has performed at the bourses in the recent past, its growth prospects and potential risks (if any) to investing in the stock. A closer look at these factors will provide investors with a better perspective.RTX Outperforms Industry, Sector & S&P500RTX’s shares have surged an impressive 42.4% in the past year, outperforming the Zacks Aerospace-Defense industry’s decline of 5.5% and the broader Zacks Aerospace sector’s growth of 2%. RTX has also outpaced the S&P 500’s return of 8.5% in the same period.Image Source: Zacks Investment ResearchOther defense players, such as Rocket Lab USA RKLB, TransDigm Group TDG and Leidos Holdings LDOS, have put up similar stellar performances. Share prices of RKLB, TDG and LDOS have surged 310.8%, 11.5% and 5.4%, respectively, over the past year.What’s Been Pushing RTX Stock Up?Steadily improving commercial air traffic has been boosting commercial OEM as well as commercial aftermarket sales for RTX in recent times. This must have encouraged stakeholders to stay invested in this stock, further corroborated by the solid share price return offered year to date.Keeping up with this trend, RTX’s Collins Aerospace unit registered a 6% year-over-year improvement in its fourth-quarter 2024 top-line performance, partially driven by a 12% improvement in commercial aftermarket sales. On the other hand, a 17% rise in commercial aftermarket and a 31% improvement in commercial OEM sales resulted in a 17.5% rise in sales for RTX’s Pratt & Whitney unit. Continued growth in commercial air traffic, including higher flight hours and a favorable OEM mix in Large Commercial Engines, primarily boosted the improvement in commercial aftermarket and OEM sales.Can RTX Stock Continue With Its Growth Streak?Looking ahead, growth prospects for the commercial aerospace market and RTX’s commercial business remain bright. As per the International Air Transport Association’s (“IATA”) latest outlook report published in December 2024, the number of global passengers is projected to increase at an average annual rate of 3.8% over the next two decades. This should boost the demand for new aircraft, thereby strengthening commercial OEM as well as commercial aerospace aftermarket sales for RTX in the coming days. Moreover, as a prominent U.S. defense contractor, RTX enjoys a steady flow of orders for its combat-proven defense products, particularly missiles and radars. Such order growth culminates into notable booking and backlog count, which, in turn, boosts the company’s long-term revenue generation prospects. Notably, RTX witnessed a solid defense backlog of $93 billion as of Dec. 31, 2024. The figure came in higher than its backlog of $90 billion at the end of the third quarter of 2024.Such solid revenue generation prospects from its commercial aerospace and defense businesses bolster earnings growth projections for this stock. In line with this, the Zacks Consensus Estimate for RTX’s long-term earnings growth rate is pegged at a solid 9.7%. A quick sneak peek at its near-term earnings and sales estimates mirrors a similar picture.RTX’s Upbeat EstimatesThe Zacks Consensus Estimate for first-quarter 2025 revenues suggests a solid improvement of 2.4% from the prior-year quarter’s level. Full-year 2025 estimates for RTX’s revenues and earnings suggest similar growth. The annual estimate figures for 2025 and 2026 have improved 1% and 0.7%, respectively, over the past 60 days. This upward revision indicates analysts’ increasing confidence in this stock.Image Source: Zacks Investment ResearchImage Source: Zacks Investment ResearchRisks to Consider Before Choosing RTXDespite the aforementioned growth opportunities, there remain certain risks to investing in RTX. One notable headwind plaguing stocks like RTX that operate in commercial aerospace is the supply-chain issue. Notably, the global supply-chain disruption that was exacerbated during the COVID period still remains a major challenge affecting international trade and, thereby, the aerospace sector. To this end, the IATA announced in its December 2024 report that jet deliveries in 2025 are now projected to be 1,802, well below its earlier expectation for 2,293 deliveries. Further downward revisions in 2025 are anticipated. Severe supply-chain issues are expected to play a major role in this low delivery projection. Such supply-chain issues might prevent RTX from delivering its finished products to its customers within the stipulated time. Since Pratt & Whitney is a major supplier of commercial jet engines, the failure can adversely impact its revenue generation prospects.  RTX Trading at a PremiumIn terms of valuation, RTX’s forward 12-month price-to-earnings (P/E) is 20.44X, a premium to its peer group’s average of 18.48X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to that of its peers. RTX’s P/E also looks stretched when compared to its five-year median.Image Source: Zacks Investment ResearchShould You Buy or Hold RTX Now?Investors interested in RTX should wait for a better entry point, considering its premium valuation. However, those who already own this Zacks Rank #3 (Hold) company’s shares may stay invested, as its upbeat estimates, impressive projections for commercial air traffic and solid defense backlog offer solid growth prospects.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Transdigm Group Incorporated (TDG): Free Stock Analysis Report Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report RTX Corporation (RTX): Free Stock Analysis Report Rocket Lab USA, Inc. (RKLB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks