Yesterday took an unexpected turn for the amusing-surprising RTX Corporation (RTX). The company reported a 9% increase in its sales during the fiscal second quarter, surpassing analyst predictions by earning $1.56 per share on a revenue of $21.6 billion.
The stock fell 1.6%.
Why Wall Street loves RTX stock
Yesterday appeared to have left investors disappointed as RTX’s guidance didn’t meet expectations. However, it seems all is well again on Wednesday, with RTX stock recovering from Tuesday’s losses and ending the day with a 4.9% increase. This upturn can be attributed to Wall Street analysts who boosted their price targets for the shares.
The game of tic-tac-toe, today saw four positive reviews in a row, with financial giants such as Bank of America and UBS expressing their admiration for RTX. Bank of America even set a price target of $175 on the stock, while also revising its 2025 forecast, but emphasizing that their long-term estimates for the company are robust.
I concur with Susquehanna Research’s stance that the ideal price for this stock seems to be around $175. They believe that the impact of tariffs has already been factored into this year’s projected earnings of $5.80 to $5.95, taking into account both optimistic and pessimistic forecasts. UBS and RBC have weighed in with their own assessments, with RBC valuing the stock at $170 per share, while UBS sees it as worth $177. Both institutions find the current valuation of this stock appealing.
Is RTX stock a buy?
Frankly speaking, I might be seen as skeptical, but I don’t share your perspective on RTX stock. Instead of simply observing their $6.1 billion net profit for the past year, it’s important to note that they only managed to produce a free cash flow of less than $3.2 billion. This discrepancy makes me question their financial health.
It’s already concerning that the stock is priced at 34 times its trailing earnings, but valuing it at more than 65.5 times its free cash flow on a defense stock with a minimal dividend yield of less than 2% and a long-term growth rate below 10% seems downright absurd.
Much as I like the company, there’s simply no way I’d buy RTX stock at these prices.
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2025-07-24 01:05