RTX Corporation

RTX Corporation (formerly Raytheon Technologies Corporation) is an American multinational aerospace and defense conglomerate, one of the largest and most technologically advanced in the world. Formed in 2020 through the blockbuster merger of United Technologies Corporation's (UTC) aerospace businesses and the legacy Raytheon Company, RTX is a titan in both the commercial aviation and military defense sectors. In simple terms, the company designs, builds, and services the high-tech systems that power modern flight and protect nations. Its business spans from the engines on a commercial jetliner and the cockpit controls that guide it, to the sophisticated radar systems that detect threats and the precision missiles that neutralize them. For investors, RTX represents a direct play on two massive, long-cycle industries: global air travel and national security. Its operations are deeply embedded in the supply chain of nearly every major aircraft and defense program, creating a powerful and resilient business model.

The modern RTX was born from a “merger of equals” in April 2020. The deal combined the defense-focused Raytheon Company with the aerospace divisions of United Technologies. To streamline the new entity and satisfy regulators, UTC first spun off its non-aerospace businesses, Otis Elevator Company (elevators) and Carrier Global Corporation (HVAC systems), into separate publicly traded companies. The strategic logic was compelling: combine UTC's commercial aerospace strengths (jet engines and aircraft components) with Raytheon's military and defense expertise (missiles, sensors, and cyber warfare). This created a more balanced and diversified behemoth, less reliant on any single market. The resulting company could sell to both airlines and air forces, often equipping the very same aircraft with different systems, from the engines that lift it off the ground to the weapons it might carry.

Following a reorganization in 2023, RTX operates through three primary business segments, each a powerhouse in its own right.

Think of Collins as providing the “brains and guts” of an aircraft. This segment is a leading supplier of avionics (the electronic systems), flight controls, landing gear, wheels, brakes, and cabin interiors. When you're on a commercial flight, there's a very high probability that dozens of components around you—from the cockpit displays to the seats and galley equipment—were made by Collins Aerospace. This division serves both commercial and military customers, making it a key beneficiary of the recovery and growth in global air travel, as well as a stable supplier to defense programs.

This is the engine-maker. Pratt & Whitney is one of the “big three” global manufacturers of aircraft engines, alongside General Electric and Rolls-Royce. Its engines power a huge portion of the world's commercial and military aircraft, from the Airbus A320neo family (with its revolutionary Geared Turbofan engine) to the F-35 Lightning II fighter jet. A crucial part of this business is the aftermarket—the highly profitable, long-term servicing, repair, and overhaul of its massive installed base of engines. An engine sale is just the beginning; the recurring service revenue can last for decades.

This segment consolidates the company's formidable defense portfolio. It is a global leader in developing and producing advanced sensors, cyber solutions, and precision weapons. This is the part of the business that builds iconic systems like:

• Patriot Air and Missile Defense System: A cornerstone of defense for the U.S. and its allies.
• Tomahawk Cruise Missiles: Long-range, precision strike weapons.
• AMRAAM Air-to-Air Missiles: The go-to missile for a majority of the world's fighter jets.

This business thrives on government defense spending and is heavily influenced by the global geopolitical landscape.

For a value investor, RTX presents a classic case of a wide-moat industrial giant with long-term, predictable revenue streams.

RTX's Economic Moat—its sustainable competitive advantage—is built on several powerful factors:

• High Barriers to Entry: You can't just decide to start building jet engines or missile defense systems in your garage. The required capital investment, technological expertise, and decades of research are staggering.
• Intangible Assets: A vast portfolio of patents and proprietary technology protects its innovations. More importantly, its long-standing, trusted relationships with the U.S. Department of Defense and other governments are nearly impossible for a newcomer to replicate.
• High Switching Costs: Once an aircraft like the F-35 is designed around a Pratt & Whitney engine, it is astronomically expensive and impractical for the customer to switch to a competitor. The entire platform is integrated. This locks in decades of aftermarket sales and upgrades.
• Long Product Cycles: Defense programs and commercial aircraft platforms last for 20-40 years or more. This provides exceptional visibility into future revenue streams.

No investment is without risk. For RTX, an investor should monitor:

• Geopolitical & Budgetary Dependence: The Raytheon segment is highly dependent on government defense budgets. A shift towards a more peaceful global environment or domestic political pressure to cut defense spending could impact future orders.
• Execution Risk: Managing massive, complex engineering projects is fraught with challenges. Delays, cost overruns, or performance issues (such as the recent powder metal issue with some GTF engines) can be costly and damage the company's reputation.
• Supply Chain Complexity: As a massive manufacturer, RTX is vulnerable to disruptions in the global supply chain, which can affect production schedules and costs.

When analyzing RTX, focus on these key metrics:

• Backlog: This is the total value of all signed contracts for future work. A large and growing backlog is a strong indicator of future revenue health.
• Book-to-Bill Ratio: This ratio compares the value of new orders received to the revenue billed during a period (New Orders / Revenue). A ratio consistently above 1x suggests the company is winning new business faster than it's completing old work, signaling growth.
• Free Cash Flow (FCF): This is the cash the company generates after all its capital expenditures. Strong Free Cash Flow is the lifeblood that funds research, pays the dividend, and finances share buybacks.