Raytheon Technologies: A Bullish Outlook Ahead of Q2 Earnings

Raytheon Technologies (NYSE: RTX) is poised to deliver its Q2 2025 earnings report on July 22, a critical moment for investors seeking clarity on the defense and aerospace giant's growth trajectory. With a robust order backlog, favorable sector dynamics, and a history of outperforming earnings estimates, RTX presents a compelling investment opportunity. This article examines the catalysts for growth, valuation prospects, and the rationale for a long position ahead of the results.

Defense Tailwinds Fueling Growth
The defense sector remains a key driver for RTX, benefiting from elevated global military spending. Governments worldwide are prioritizing modernization, with the U.S. Department of Defense allocating record budgets to combat systems, cyber resilience, and advanced propulsion technologies. RTX's Collins Aerospace and Raytheon divisions are at the forefront of these trends, supplying critical systems for fighter jets, missiles, and satellite networks.

As of June 2025, RTX's total backlog stood at $218 billion—$93 billion in defense and $125 billion in commercial aerospace. This pipeline ensures visibility into future earnings, with defense contracts accounting for roughly 40% of the total. The company's leadership in hypersonic systems, electronic warfare, and fifth-generation fighter upgrades positions it to capitalize on geopolitical tensions and modernization drives.

Commercial Aviation Recovery Adds Momentum
While defense remains the backbone, RTX's commercial aviation division is also rebounding. Post-pandemic demand for air travel, coupled with the replacement of older aircraft, has boosted orders for Pratt & Whitney engines and Collins' aircraft components. Airlines are prioritizing fuel-efficient and sustainable technologies, aligning with RTX's innovation pipeline, including electric propulsion systems and carbon-neutral aviation initiatives.

Analysts project Q2 2025 revenue growth of 4.46% year-over-year, driven by both defense and commercial segments. The consensus EPS estimate of $1.43 reflects a modest 1.7% increase from Q2 2024's $1.41, but this figure could be exceeded given RTX's track record of beating estimates. Over the past 12 months, RTX has outperformed EPS forecasts 100% of the time, with an average beat of 8%.

Valuation: A Bargain at Current Levels?
RTX's forward P/E of 22.81 and PEG ratio of 2.12 suggest the stock is trading at a premium relative to its historical average. However, these metrics are justified by the company's long-term growth prospects. The 17.98% EPS growth forecast referenced in RTX's July 2024 guidance (for the full year 2025) implies a trajectory from $5.73 in 2024 to $6.76 in 2025, though the company later revised its 2025 EPS target to $6.00–$6.15. This discrepancy highlights the need to focus on near-term catalysts rather than overly ambitious projections.

Despite the moderated outlook, RTX's stock price has held above $140 since early 2025, outperforming the S&P 500 by 12% year-to-date. With a dividend yield of 1.4% and a history of share buybacks, RTX offers both growth and income appeal.

Catalysts for a Post-Earnings Rally
Investors should watch for two key factors in the Q2 results:
1. Defense Contract Wins: RTX's ability to secure new orders in hypersonic systems, missile defense, and international partnerships (e.g., Middle Eastern and Asian militaries) could expand its backlog.
2. Commercial Margin Expansion: Higher aircraft deliveries and cost efficiencies in its supply chain could improve margins, especially as airlines prioritize long-term partnerships with suppliers like RTX.

Investment Thesis: Buy the Dip Ahead of Earnings
RTX's Q2 results are a pivotal moment to assess its execution against a backdrop of macroeconomic and geopolitical tailwinds. Even with the revised 2025 EPS guidance, the company's backlog, technological leadership, and consistent earnings beats justify a long position, particularly if shares dip ahead of the report due to profit-taking or broader market fears.

Risk Factors to Monitor:
- Delays in defense contract approvals or budget allocations.
- Supply chain disruptions in critical components.
- Slower-than-expected commercial aviation recovery.

Conclusion
Raytheon Technologies is a bellwether for global defense spending and aerospace innovation. With a solid order book, a history of beating estimates, and a valuation grounded in long-term growth, RTX offers a balanced risk-reward profile ahead of its Q2 earnings. Investors should consider accumulating shares on dips below $140, with a target of $155–$160 for the next 12 months. The earnings report on July 22 will be a critical test—but the fundamentals suggest this is a stock to own for the long haul.