RTX Stock Looks to Prosper as Middle Eastern Conflict Escalates

Business Insider

4 hours ago

Amid rising tensions between Israel and Iran, the need for cutting-edge defense capabilities is more urgent than ever. RTX Corporation (RTX) plays a crucial role in this space, supporting systems such as Israel's Iron Dome and other defense initiatives. While not a high-growth stock, RTX offers a resilient investment amid macroeconomic uncertainty, with a forward dividend yield of 1.87% providing an additional layer of return stability for investors.
Confident Investing Starts Here:
With year-to-date performance already outshining the S&P, recent news of a new theatre of war in the Middle East adds a layer of security for risk-averse investors.
RTX Bolsters Israel amid Iran's Nuclear Missile Threat
The ongoing Israel-Iran conflict underscores the heightened geopolitical risks in the region, with Iran's nuclear ambitions posing a significant threat to Western alliances, especially Israel. In this context, RTX's role in supporting Israeli defense infrastructure is both strategically vital and commercially significant. While the situation remains deeply troubling, sustained investment in defense appears essential for global stability, and RTX is well-positioned to benefit from these structural tailwinds.
RTX co-develops and co-produces Israel's Iron Dome with Rafael Advanced Defense Systems and is a key contractor for the David's Sling interceptor and Patriot missile systems used by U.S. allies in the Gulf. These programs are backed by $500 million annually under the U.S.-Israel Memorandum of Understanding, further solidifying RTX's role in regional defense.
Missile defense is a core contributor to RTX's nearly $100 billion backlog. The segment's operating margins—around 10%—reflect efficiencies from scale and U.S. government co-funding, which helps reduce R&D costs. In today's volatile geopolitical environment, RTX offers investors portfolio resilience. Just as the company helps protect Western nations from external threats, its stock serves as a defensive asset in times of global uncertainty.
AI Could Disrupt RTX's Established Defense Moat
RTX is currently competing with Lockheed Martin (LMT) and Northrop Grumman (NOC) for a major hypersonic missile interceptor contract—a bid that, if lost, could result in hundreds of millions of dollars in potential revenue loss for the company. At the same time, a new wave of defense startups, particularly from Silicon Valley, is emerging with AI-native, autonomous technologies. While RTX is actively integrating AI across its product portfolio, the rise of AI-first firms—such as Anduril—poses a long-term threat to its market share.
That said, RTX is likely to remain a dominant force in the evolving defense landscape. Its long-standing relationships with key defense customers, such as the U.S. Department of Defense, Israel, and Gulf states, give it a strategic edge. Rather than being displaced by newer players, it's more probable that emerging AI defense startups will seek partnerships with established firms like RTX. In the tightly interconnected Western defense ecosystem, deeply embedded contractors with decades of trust and proven capabilities—such as RTX—are positioned to endure and adapt.
RTX Stock Offers Moderate but Resilient Upside
Based on my current valuation model, I project RTX to deliver normalized earnings per share of approximately $6.50 by mid-2026. Assuming only a modest contraction in the trailing 12-month price-to-earnings ratio—from 25 to 24, reflecting elevated investor sentiment amid ongoing geopolitical tensions—this supports a 12-month price target of around $155.
With shares currently trading near $145, that implies a potential price appreciation of about 7%. When factoring in RTX's dividend yield of roughly 1.5% to 2%, the total expected return over the next year is approximately 9%.
This outlook reinforces my view of RTX as a defensive, income-generating holding rather than a high-alpha opportunity. The company has increased its dividend for 32 consecutive years, with a five-year dividend growth rate of 6.65% —a testament to its consistency and financial strength. However, given that my portfolio is oriented toward high volatility and alpha generation, RTX, while fundamentally sound, does not align with my current investment strategy.
Is RTX a Good Stock to Buy?
Wall Street currently rates RTX as a Moderate Buy, with 12 Buy ratings, five Holds, and no Sells. The average price target stands at $140.33, suggesting a potential downside of about 4% over the next 12 months.
My independent valuation is more aligned with the higher end of analyst estimates. While geopolitical tensions may boost short-term sentiment, the consensus underscores the importance of focusing on long-term fundamentals rather than chasing near-term headlines.
RTX is a Prime Defense Investment
There are valid reasons to approach an allocation to RTX with caution. Chief among them is the potential for AI-driven disruption to erode future returns. Additionally, RTX offers only moderate annual return potential, although it provides meaningful stability and resilience across various macroeconomic environments.
While I'm moderately bullish on the stock, I choose not to hold a position personally, as RTX functions more as a portfolio hedge than a high-growth, alpha-generating asset. I currently maintain that defensive positioning can be achieved through a cash allocation instead.