RTX Corporation (RTX): A Strategic Buy in a Resilient Aerospace Sector Amid Supply Chain Improvements and Strong Free Cash Flow Growth

The aerospace industry in 2025 is navigating a paradox: it faces persistent supply chain headwinds but is simultaneously underpinned by surging demand for air travel and defense spending. Amid this duality, Raytheon Technologies Corporation (RTX) emerges as a compelling investment opportunity. With a diversified portfolio spanning Collins Aerospace, Pratt & Whitney, and Raytheon, RTX is uniquely positioned to capitalize on sector tailwinds while leveraging its operational resilience to mitigate risks. This article examines RTX's strategic advantages, its ability to navigate supply chain challenges, and its robust financials to argue why the stock is a buy for long-term investors.

Sector Dynamics: A Tale of Two Forces

The aerospace sector is experiencing a tug-of-war between demand and supply. On one hand, global air passenger traffic is projected to exceed 10 billion passengers in 2025—a 6% increase from 2024 and a 16% jump from 2019. Airlines are extending aircraft lifespans due to production delays, fueling demand for maintenance, repair, and overhaul (MRO) services. On the other hand, supply chain bottlenecks—driven by geopolitical tensions, labor shortages, and shipping disruptions—have pushed shipping rates to five times pre-pandemic levels.

RTX, however, is not merely reacting to these forces. The company is proactively investing in digital tools to enhance supply chain visibility and supplier compliance. For instance, Collins Aerospace's focus on defense and commercial aftermarket sales—up 13% and 12% respectively in Q4 2024—demonstrates its ability to pivot toward less volatile markets. Meanwhile, Pratt & Whitney's 18% sales growth in the same period highlights the resilience of its propulsion systems, particularly in military contracts like the F135 engine.

RTX's Diversified Exposure: A Hedge Against Volatility

RTX's three core segments—Collins Aerospace, Pratt & Whitney, and Raytheon—offer a balanced exposure to both commercial and defense markets. This diversification is a critical strength in an industry prone to cyclical swings.

• Collins Aerospace: In Q4 2024, the segment reported $7.5 billion in sales, driven by 13% growth in defense and 12% in commercial aftermarket. While commercial original equipment (OE) sales declined 6%, the segment's margin expansion (up 17% on an adjusted basis) underscores its operational efficiency.
• Pratt & Whitney: The segment's $7.6 billion in Q4 sales reflects a 31% increase in commercial OE sales and a 17% rise in commercial aftermarket demand. Military sales grew 8%, buoyed by the F135 program.
• Raytheon: Despite the divestiture of its Cybersecurity, Intelligence and Services business, Raytheon's sales rose 4% year-over-year, driven by land and air defense systems like Global Patriot and NASAMS.

This tripartite structure ensures that RTX is not overly reliant on any single market, reducing its vulnerability to sector-specific downturns.

Free Cash Flow Growth: A Catalyst for Shareholder Value

RTX's financials in 2024 were a testament to its operational prowess. The company generated $4.5 billion in free cash flow, with $3.7 billion returned to shareholders. For 2025, it projects free cash flow of $7.0–$7.5 billion, driven by a $218 billion backlog (including $93 billion in defense contracts). This robust cash flow generation provides flexibility for dividends, buybacks, and reinvestment in innovation.

The company's capital expenditures of $1.1 billion in Q4 2024 further signal its commitment to long-term growth. These investments are likely targeting automation, supplier diversification, and R&D for next-generation technologies—areas critical for maintaining competitiveness in aerospace.

Valuation Resilience: A Buy on Strong Fundamentals

RTX's valuation appears attractive when viewed through the lens of its fundamentals. As of July 2025, the stock trades at a forward P/E of ~12x, below its 5-year average of 15x. This discount reflects market skepticism about supply chain risks but overlooks RTX's ability to execute on its strategic priorities.

• Backlog Strength: The $218 billion backlog (with $93 billion in defense) ensures consistent revenue streams for years. Defense spending, in particular, is less cyclical and offers higher margins.
• Margin Expansion: RTX's adjusted operating margins in 2024 grew across all segments, driven by cost efficiencies and favorable pricing.
• Debt Management: With a debt-to-equity ratio of 0.4x, RTX is in a strong position to fund growth without overleveraging.

Investment Thesis: Buy for Long-Term Exposure

RTX's combination of sector leadership, diversified exposure, and resilient cash flow makes it a strategic buy. While short-term supply chain challenges persist, the company's investments in digital tools and supplier diversification are mitigating risks. The defense segment, in particular, offers a high-margin, stable revenue stream that offsets potential volatility in commercial markets.

For investors, the key risks include geopolitical instability and inflationary pressures on commodity prices. However, RTX's scale and operational discipline position it to navigate these headwinds. Given its strong backlog, improving margins, and undemanding valuation, RTX is well-positioned to deliver long-term value.

In conclusion, RTX is not just a beneficiary of the aerospace sector's growth—it is a driver of innovation and resilience. For those seeking exposure to a sector poised for recovery, RTX offers a compelling, well-balanced opportunity.