The Missile Shortage Is Structural. The Question Is Whether RTX Is Priced for It.

Europe has begun asking Spain and Greece to hand over the Patriot missiles they have spent decades acquiring. The request sounds temporary. The shortage behind it is not.

American stockpiles of Patriot interceptors in Europe are, according to a U.S. defence official and a NATO source who spoke to the Associated Press, "beyond critical". The ongoing conflict with Iran has consumed roughly 65% of America's total Patriot inventory—about 1,500 of 2,330 missiles, by the Centre for Strategic and International Studies's estimate. Ukraine, meanwhile, has been intercepting only 29 of every 195 Russian ballistic missiles it faces. Governments across Europe are scrambling to replenish their own defences even as they are asked to contribute to Kyiv's. The arithmetic does not work.

The supply problem is structural rather than political. Lockheed Martin produces approximately 600 advanced PAC-3 Patriot interceptors a year. Raytheon, the other manufacturer, has recently restarted production of the older PAC-2 variant for the first time in more than 30 years, after the U.S. Army placed a $441.6m order in April. The Pentagon's production target is 2,000 interceptors annually by 2030—a figure that still leaves a wide gap between what governments want and what the factories can make. NATO's first Patriot production facility in Germany is due to open in September, but it is a new line, not an existing one, and deliveries may not arrive until early next year.

For investors, the relevant question is not whether demand for air-defence missiles has materialised. It has, in volumes that would have been inconceivable a few years ago. The question is whether the companies that stand to profit from this shortage are already priced for it.

RTX, the parent of Raytheon, is the most direct American play on the interceptor boom. Its Raytheon division booked more than $5bn in Patriot effector orders during the second quarter of 2026. Total Raytheon sales rose 18% year on year to $8.3bn, driven almost entirely by land and air defence programmes. On its earnings call, RTX reported a defence backlog of $119bn—up 22% from a year earlier—and a total corporate backlog of $289bn. The company also won a $22.9bn Navy contract for Tomahawk cruise missiles, a sum nearly equal to one-fifth of its existing defence backlog. JPMorgan estimates that two-thirds of RTX's recent profit guidance increase came from Raytheon. The company raised its full-year 2026 adjusted sales forecast to $95bn–$96bn and adjusted EPS to $7.10–$7.25, up from $6.70–$6.90.

The order book is extraordinary. The concern is the conversion rate from orders to revenue to profit, and the price investors are paying for the privilege of watching it happen.

RTX trades at a market capitalisation of roughly $286bn. Its trailing price-to-earnings ratio stands at about 37, approximately 30% above its 10-year median of 27. The forward P/E, based on 2026 consensus earnings estimates, is around 29. The stock has been rated a "buy" by most analysts, and AInvest's aggregate rating signals support that view, with composite analysis and fundamental ratings both pointing toward strength. On the surface, the valuation gap between trailing and forward multiples reflects the market's expectation that Raytheon's growth will compress the multiple over the next 12 months.

That expectation is rational but not guaranteed. Defence contractors have a long track record of winning enormous contracts and then struggling with supply-chain bottlenecks, labour shortages, and cost overruns that delay revenue recognition. RTX itself is investing an additional $100m in U.S. manufacturing capacity and expanding to second and third source suppliers. Production more than doubled across critical munitions in the first half of 2026, but doubling from a low base is not the same as meeting unlimited demand. The company is partnering with European suppliers, including Polish facilities for Patriot components, and working with firms such as Kongsberg and MBDA to broaden the industrial base. These efforts take time, and time is the constraint.

To be sure, RTX is not a single-product company riding a single programme. Its Collins Aerospace division provides a commercial and helicopter business that is less sensitive to geopolitical shocks, and its Pratt & Whitney engines, despite past grounding issues, remain a cash-flow anchor. The Raytheon segment is one of three, and its recent performance is the driver, not the entirety. Investors who view RTX purely as a proxy for the missile shortage are overexposed to the execution risk that comes with rapid scale-up. They are also paying a premium that assumes smooth execution.

The European picture complicates the thesis further. EU defence spending reached €343bn in 2024 and is projected to hit €381bn in 2025, up 11%. Defence investments alone grew 42% to €106bn. Spain, long a modest NATO spender, increased its military budget by 50% to $40.2bn in 2025, crossing the 2% of GDP threshold for the first time since 1994. Germany's procurement spending is projected to rise from €32bn in 2024 to €100bn by 2029. The money is real. The production capacity to absorb it is not.

An Air Street Press analysis published in January 2026 documented the gap plainly: in Germany, defence demand has more than doubled since 2019 while production has risen by only about a quarter. The demand curve is growing five to six times faster than output. This is not a failure of will. It is a failure of infrastructure built for peace and now confronted with conflict.

The consequence for investors is that the demand case for RTX is easier to make than the earnings case. Orders do not become revenue on the day they are signed. Missiles must be manufactured, tested, and delivered across multi-year timelines. During that lag, the stock price reflects a forward expectation of profit that the company has not yet earned. The trailing multiple of 37 embeds a belief that Raytheon will convert its backlog into earnings at a pace that sustains the premium. If production ramps as planned, the market is not unreasonable. If supply-chain constraints, labour shortages, or the emergence of European alternatives—Aster 30, IRIS-T SLM, SAMP/T NG—reduce the pace of U.S. exports, the multiple could contract faster than the thesis.

There is also the less visible risk of European self-reliance. CSIS has proposed an "ASAP for Air Defence" programme, modelled on the EU's 2023 ammunition-production initiative, that would channel $5bn–$10bn in European funding toward tripling Aster 30 output and expanding IRIS-T production. The idea has political logic: Europe does not want to find itself dependent on American factories while asking American allies to defend it. It also has commercial implications for RTX. A more capable European air-defence industrial base would not eliminate demand for Raytheon's products. It would redirect a portion of it.

None of this changes the direction of travel. The interceptor shortage is genuine, the demand is multi-year, and RTX's Raytheon division sits at the narrow end of the bottleneck. The question is not whether the stock has a tailwind. It has one. The question is whether the premium the market has built into the share price reflects a clear picture of what comes next or an assumption that scale-up will proceed without friction.

The stock rewards patience and punishes execution gaps. Investors who hold RTX should track production rates, not order announcements, as the true signal of whether the earnings trajectory justifies the multiple. Those who do not yet own it should consider that the most obvious trade in the market is often the most thoroughly priced.