RTX (RTX -0.34%), best known for its defense business, also happens to be what's known as a defensive stock. The recession-resistant nature of the company's defense unit provides stability to earnings and dividends, making the stock defensive in nature.
But stability is not just another way of saying "low growth." Over the past year, this stock has surged by 38% largely on enthusiasm for the strong growth it's generating, particularly from the company's commercial aerospace segment.
Even better, further growth could be just around the corner. Unlike last quarter, where commercial business was the growth driver, future growth could be led by RTX's core defense business.
Image source: Getty Images.
RTX and its "magnificent" year-to-date gains
With its surge thus far in 2025, RTX has not only handily beaten major indices like the S&P 500, but it has also outperformed larger stocks that the markets have come to associate with strong returns, like the "Magnificent Seven" tech giants.
Interestingly enough, earlier this year, RTX's shares delivered sideways price performance. Concerns about rising tariffs were top of mind among investors. This factor outweighed positives like RTX's solid Q1 2025 results.
However, in June, following a sudden spike in Mideast tensions, share prices in RTX and its defense industry peers began to spike as well. Even as these tensions de-escalated, RTX's rally persisted. Shares continued to rise ahead of and after the company's Q2 2025 earnings release, hitting new all-time highs as a result.
| Metric | Q2 2025 | Q2 2024 | % Change |
|---|---|---|---|
| Revenue | $21.6 billion | $19.7 billion | 9% |
| Adjusted net income | $2.1 billion | $1.9 billion | 12% |
| Adjusted earnings per share | $1.56 | $1.41 | 11% |
Source: RTX earnings reports.
It's no wonder. As seen in the chart above, during the quarter ending June 30, 2025, the company reported solid sales and earnings growth. This growth was driven largely by strong commercial sales growth from RTX's Pratt & Whitney division.
There are still many chapters left in this growth story
For RTX last quarter, sales and earnings were not only up on a year-over-year basis. They were also up sequentially, or quarter over quarter, as well. During Q1 2025, RTX's sales and adjusted earnings per share grew by only 5% and 10%, respectively.
Before you jump to the conclusion that last quarter's growth was a "one and done" event, take a look at another key performance indicator: contract backlog. As of June 30, 2025, the company's total backlog stood at $236 billion, up 15% compared to a year ago. Commercial backlog totaled $144 billion, while defense backlog totaled $92 billion.
A year ago, these figures stood at $129 billion for commercial and $77 billion for defense.Hence, with the defense backlog, up 20% over the past year, growing faster than the commercial backlog, up 11.6% over the past year, RTX's defense segment could experience a greater growth resurgence in the coming quarters.
That's not all. Strong growth in defense could make up for any turbulence among RTX's commercial aviation businesses, if recent macro uncertainty gives way to an economic slowdown. Instead of stalling out within a quarter or two, this "growth story" may have many more chapters to go.
What this means for the stock moving forward
Currently, RTX trades for around 24.6 times forward earnings. Compared to peers like Lockheed Martin (LMT 0.08%), which trades for around 16.8 times forward earnings, this valuation may sound steep.
However, if the growth story persists, I believe this valuation is sustainable. Wall Street loves a growth story, and this one continues to strengthen. That's clear from RTX's recent spate of contract wins, including a $1.7 billion air and missile defense radar contract with the U.S. Army.
Only time will tell whether shares experience further multiple expansion, but the stock could continue to rise in tandem with earnings growth. Coupled with its quarterly cash dividend, which was recently increased by 8% and provides shares with a 1.67% forward yield, RTX could deliver steady gains over the next year. The prospect of this appeals to me, given growing concerns about another stock market correction on the horizon.
