Jefferies has upgraded its rating on RTX Corporation, the US defence and aerospace manufacturer formerly known as Raytheon Technologies, from 'hold' to 'buy', citing a stronger outlook for margins and free cash flow. The investment bank's analysts said they expect the company's ongoing restructuring and cost-saving initiatives to deliver significant improvements in profitability over the next two years.
The upgrade comes as RTX continues to benefit from robust demand for its defence products, including missile systems and radar equipment, driven by elevated global military spending. Jefferies also highlighted the potential for stronger cash generation from the company's commercial aerospace division, which supplies engines and components to Boeing and Airbus.
RTX shares edged 1.8% higher in pre-market trading on the New York Stock Exchange following the announcement. The stock has gained roughly 12% year-to-date, outperforming the broader S&P 500 defence sector index. Analysts at Jefferies set a new price target of $135, up from $120, implying further upside of around 8% from current levels.
For UK investors with exposure to US equities through global funds or pension portfolios, the upgrade adds to a positive narrative around defence stocks. The sector has been a relative bright spot amid broader market volatility, supported by sustained government contracts and geopolitical tensions. However, some analysts caution that valuation multiples in the defence space are now elevated, and any slowdown in order flow could pressure shares.
The upgrade also reflects a broader shift in sentiment towards industrial and aerospace names, as supply chain disruptions ease and input costs stabilise. Jefferies noted that RTX's management has demonstrated a clear commitment to improving operational efficiency, which should translate into higher returns on capital over the medium term.