On Wednesday, UBS analyst Gavin Parsons (NYSE:PSN) increased the price target for RTX Corp. (NYSE:RTX) shares to $138, up from the previous target of $133, while maintaining a Buy rating on the company. With analyst targets ranging from $120 to $160 and a consensus "Buy" recommendation, RTX has garnered significant attention from Wall Street. According to InvestingPro data, five analysts have recently revised their earnings estimates upward for the upcoming period. Parsons believes that despite RTX’s stock trading down due to confusion around the impact of tariffs, the company is well positioned to mitigate these effects in the coming years.
The analyst noted that RTX delivered strong first-quarter results and confirmed its financial guidance. Supporting this positive outlook, InvestingPro data shows RTX achieved impressive revenue growth of 17.2% in the last twelve months, with total revenue reaching $80.7 billion. He expressed confidence that RTX could neutralize the tariff impact by 2026. Parsons estimated that if the $850 million tariff cost is annualized to roughly $1.1 billion, it would represent only about 2.5-3% of the combined Commercial Aerospace revenue of RTX’s Collins and Pratt divisions.
Parsons detailed a strategy by which RTX could offset the tariff costs through a combination of price increases and cost reductions. He suggested that if RTX were to reduce costs by 1% across Collins/Pratt’s total revenue, the necessary price increase on commercial aftermarket services would only need to be between 1.5-2%.
The analyst acknowledged the complexity of the situation, noting that not all aftermarket pricing is based on catalog prices, which are typically updated at year-end. However, he considered the challenge manageable beyond 2025. Parsons also stated that for the current year, he remains at the high end of the EPS guidance, even including a $250 million impact from tariffs.
Parsons highlighted that RTX’s valuation has become more attractive, with the stock trading at just 12.0 times the projected 2026 EBITDA, a decrease from 13.4 times earlier in the week. He praised the company’s Aerospace and Defense segments for demonstrating strong revenue and margin growth in the first quarter. He also pointed to original equipment (OE) demand and aftermarket services as being supported by pent-up replacement demand and capacity constraints, respectively, with additional international upside at Raytheon (NYSE:RTN) contributing to both revenue and margins.
In conclusion, Parsons reiterated his Buy rating for RTX Corp., signaling confidence in the company’s ability to navigate the tariff landscape and continue its growth trajectory. The company’s strong market position is further evidenced by its impressive dividend track record, having maintained payments for 55 consecutive years with a current yield of 2.2%. For investors seeking deeper insights, InvestingPro offers comprehensive analysis of RTX’s financial health, valuation metrics, and growth potential, along with 10+ additional ProTips and a detailed Pro Research Report available to subscribers.
In other recent news, RTX Corp reported impressive Q1 2025 earnings, with adjusted earnings per share of $1.47, surpassing the forecast of $1.35. The company also exceeded revenue expectations, posting $20.3 billion against a forecast of $19.82 billion, marking a 5% increase year-over-year. Despite these positive results, RTX’s stock experienced a decline. The company is investing $2 billion in U.S. manufacturing capacity in 2025, reflecting its commitment to growth. In analyst activity, Morgan Stanley upgraded RTX from Equal-weight to Overweight, citing the market’s overreaction to potential tariff impacts. Analysts believe RTX’s strong position in the defense sector, which contributes 54% of its revenue, provides resilience against tariffs. Morgan Stanley predicts RTX will offset higher costs as contracts renew over the next five years. These recent developments underscore RTX’s robust financial performance and strategic positioning amidst market challenges.
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