Soaring about 14% over the past three months, RTX (RTX 0.80%) stock has outperformed the S&P 500 which has risen about 9% during the same period. And Cai von Rumohr, an analyst at TD Cowen Financial, doesn't think the stock's climb is over. In fact, von Rumohr is optimistic about the stock's potential and recently raised his price target on the aerospace and defense conglomerate from $106 to $115. That implies a 22% upside over the next 12 months or so from its current price.
But one analyst's improved outlook doesn't mean the stock is necessarily a buy. Let's take a closer look at what's underpinning von Rumohr's estimate and whether investors should fortify their portfolios with this leading defense stock.
NYSE: RTX
Key Data Points
Two factors form the basis for the bullish outlook on RTX
According to Thefly.com, von Rumohr predicates his upwardly revised price target on two things. First, RTX (formerly Raytheon Technologies) will benefit from growth in its commercial aftermarket business. Second, the company will prosper from increased defense spending in 2025 and 2026.
RTX already enjoys growth in the aftermarket business. In 2023, RTX achieved a 23% increase in commercial aftermarket sales compared to 2022. On the company's Q4 2023 conference call, moreover, Chris Calio, RTX's Chief Operating Officer, said the "strong recovery [in air travel] has helped drive significant aftermarket demand for both wide-body and narrow-body aircraft, with growth expected to continue into 2024."
A strong backlog makes Raytheon look like a buy
This defense industry stalwart is worthy of consideration for investors looking for a conservative stock for their portfolio. What makes RTX especially appealing now is the company's strong backlog which stands at $196 billion. While the air travel recovery will surely benefit RTX, it's the robust backlog that more notably suggests that the company is poised for growth.
Von Rumohr's price target is hopeful even if his timeframe for the price target was vague. RTX is a defense industry powerhouse that's a solid buy for those with long-term investing horizons.
