RTX Stock Rises as Aerospace Momentum and Tariff Relief Boost 2025 Outlook

RTX delivered a robust set of results for the second quarter of 2025, capitalizing on momentum in the commercial aerospace sector and successfully stabilizing its geared turbofan (GTF) program. The company saw significant aftermarket growth across Pratt & Whitney and Collins Aerospace, bolstered by improved supply chain conditions and heightened demand.

Executives from RTX highlighted the benefits of upcoming FAA modernization investments, which are poised to present significant long-term opportunities. Despite challenges related to ongoing trade friction and tariff burdens, the company revised its full-year sales outlook upward and confirmed its free cash flow guidance. RTX executives further elaborated on favorable developments regarding tariffs, which helped mitigate impacts considerably and provided better financial visibility for the year's second half.

The company's leadership, including President and CEO Christopher Calio, emphasized that the estimated impact of tariffs for the year had been improved, reducing from an anticipated $850 million to $500 million. This reduction was split between external factors, such as the halting of new tariff rate implementations and the UK’s aerospace component exemptions, alongside internal strategies like supply chain optimization and pricing actions. As of the first half of the year, RTX incurred approximately $125 million in tariff costs, with expectations of an additional $375 million in the latter half. Specifically, $275 million pertains to Collins Aerospace and $225 million to Pratt & Whitney, with significant costs already recorded at both companies during Q2.

CFO Neil Mitchill Jr. stressed that while the current tariff estimate is robust, potential policy changes could alter these figures. However, RTX has built resilience into its financial approach to manage such uncertainties. The company also expects operating gains at Raytheon and increased volume at Pratt & Whitney and Collins Aerospace to provide an approximate ten-cent EPS benefit, offsetting some tariff impacts.

Commercial aerospace continued to demonstrate strong performance, unaffected significantly by trade uncertainties. Both Collins Aerospace and Pratt & Whitney experienced solid growth in original equipment and aftermarket sales. CEO Calio noted sustained high global revenue passenger kilometers (RPKs) and low retirement rates, supporting ongoing shop visits. Notably, Pratt booked over 1,000 new GTF engine orders during the quarter, reflecting confidence in future production schedules.

Pratt & Whitney's GTF program is advancing strongly, illustrating operational stability and promising maintenance and retrofit growth. Q2 marked a 22% increase in MRO output for the PW1100 series, despite a previous work stoppage. RTX is gearing up for the introduction of the GTF Advantage upgrade, aimed at significant operational benefits and market competitiveness, with initial deliveries set by year-end.

On the production front, Pratt & Whitney continues to navigate production ramps for narrowbody engines, emphasizing robust aftermarket support and recovery efforts following a recent work stoppage. The balanced attention to OEM production and MRO services remains a strategic focus. Meanwhile, despite temporary disruptions from external factors like Spirit Airlines' bankruptcy, Pratt demonstrated strong year-over-year sales growth.

Looking forward, RTX forecasts continued growth for Pratt with improved margins, supported by ongoing advancements in its GTF program and increased shop visit revenue. This expectation of sequential margin expansion extends through the upcoming years, driven by strategic upgrades and economic conditions supporting volume growth across Pratt's businesses.

Collins Aerospace is projected for notable second-half growth, particularly as Boeing’s production stabilizes and demand for services continues to rise. While some first-half performance remained modest, Q3 and beyond are anticipated to rebound with booming OEM and aftermarket sales, supported by Boeing's accelerating output. Efforts within Collins are also directed towards substantial internal restructuring to enhance operational efficiencies and long-term stability.

On the supply chain front, RTX is reporting solid recoveries, with expansions in structural casting outputs and backlog reductions. These improvements reflect the company's proactive involvement and strategic cooperation with suppliers, a crucial factor sustaining broader operational stability.

Moreover, the FAA modernization efforts under the U.S. government's recent budget have opened up substantive opportunities for Collins Aerospace in enhancing radar systems, control towers, and much more. This legislation acts as a catalyst for sector growth, ensuring upgrade demand and system improvements that will fundamentally bolster the U.S. aviation infrastructure.

RTX revealed its financial targets for the full year, raising its revenue outlook while adjusting earnings expectations with tariff considerations in mind. Executives remain optimistic about the underlying strength of the company's core operations, underpinned by solid execution across segments like Pratt & Whitney and Collins Aerospace. Despite some external pressures, RTX’s strategic measures and market positions assure a firm trajectory towards growth and enhanced profitability.