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Aerospace’s New Horizon: Why GE and RTX Signal a Sector Turnaround

Julian CruzMonday, May 19, 2025 11:34 am ET

40min read

The aerospace and defense sector is at a pivotal inflection point. After years of pandemic-induced stagnation and geopolitical uncertainty, two titans—General Electric (GE) and Raytheon Technologies (RTX)—are now posting record highs, serving as harbingers of a broader recovery. Their stock performance in early 2025, driven by surging demand for commercial aviation, defense modernization, and industrial resilience, underscores a compelling investment thesis: the sector is primed for sustained growth. Here’s why investors should act now.

The 52-Week Highs: A Benchmark of Resurgence

GE and RTX’s recent stock milestones are no fluke. GE’s shares hit a 52-week high of $233.67 on May 19, 2025, a staggering 29.6% jump from their 2024 lows. RTX, meanwhile, traded at a near-record $135.48 on May 16, just 0.7% below its 52-week high of $136.40, set earlier in the year. These peaks are not isolated events but the culmination of sector-wide tailwinds.

Commercial Aviation: The Pandemic’s Silver Lining

The post-pandemic recovery in air travel has been anything but linear, but it’s now hitting its stride. GE’s $96 billion deal with Qatar Airways—announced in May 2025—epitomizes this shift. The agreement, involving over 400 GE9X and GEnx engines, reflects pent-up demand for modern, fuel-efficient propulsion systems. With global passenger traffic projected to exceed pre-pandemic levels by 2026, airlines are upgrading fleets to meet sustainability mandates and rising capacity needs.

GE’s stock price surge aligns directly with this trend. Its aerospace division, now renamed GE Aerospace, has repositioned itself as a leader in hybrid-electric and hydrogen propulsion technologies, positioning it to capture $300 billion in cumulative engine orders through 2030.

Defense Modernization: RTX’s Geopolitical Tailwind

RTX, the parent company of Raytheon and Pratt & Whitney, is benefiting from a $200 billion tailwind in U.S. defense spending. The Biden administration’s 2024 budget allocated record funds for hypersonic missile systems, cyber defense, and advanced propulsion, all core competencies for RTX.

The company’s $136.40 52-week high reflects confidence in its order backlog, which includes contracts for the F-35 Joint Strike Fighter engine, the Patriot missile system, and next-gen satellite technologies. Geopolitical tensions—exemplified by U.S.-UAE economic partnerships and Indo-Pacific alliances—are accelerating demand for RTX’s products.

Valuation: Undervalued Multiples vs. Growth Trajectory

Despite their recent highs, both stocks remain undervalued relative to their growth prospects.

GE’s P/E ratio of 15x lags its 20%+ projected earnings growth, while its free cash flow is set to hit $10 billion by 2026.
RTX’s 18x P/E compares favorably to its 8% annual revenue growth, but this understates its margin expansion. RTX’s industrial segment margins are expected to rise to 18% by 2025, driven by cost discipline and high-margin defense programs.

Why Overweight Now?

The case for a long-term overweight in GE and RTX hinges on three pillars:
1. Order Backlogs: GE’s backlog stands at $200 billion, with 60% tied to aviation; RTX’s defense backlog exceeds $100 billion, secured through multiyear contracts.
2. Margin Turnaround: Both firms are shedding legacy businesses (GE’s healthcare division, RTX’s legacy IT operations) to focus on high-margin sectors.
3. Sector Leadership: Their outperformance is no coincidence—these stocks are the sector’s canaries in the coal mine. If they’re rising, the broader aerospace/defense ETFs (e.g., XAR) will follow.

Risks? Yes—but the Reward Outweighs Them

Skeptics point to supply chain bottlenecks and inflationary pressures. Yet both companies have already mitigated these risks: GE’s partnership with Siemens to streamline manufacturing, and RTX’s vertical integration in critical components, reduce exposure to external shocks.

Final Call: Buy the Dips, Hold for the Surge

The data is clear: GE and RTX are leading indicators of a sector-wide recovery. Their 52-week highs are not peaks but baselines. With commercial aviation rebounding, defense budgets expanding, and valuations still attractive, these stocks offer asymmetric upside.

Investors who commit capital now will capture not just the next leg of growth but also the sector’s transformation into a high-margin, innovation-driven engine. The time to act is now—before the rally leaves smaller players behind.

This article is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.

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