Why the new executive order matters for RTX (RTX)

President Donald Trump’s new executive order targets large defense contractors by blocking dividends and stock buybacks until contract performance improves. RTX (RTX) is explicitly called out for past shareholder return policies.

RTX’s share price has been strong in recent months, with a 90 day share price return of 26.61% and a 1 year total shareholder return of 70.08%, suggesting momentum has been building alongside fresh contract wins and venture investments, even as the executive order raises questions about how future cash returns to investors are structured.

If this kind of defense sector scrutiny has your attention, it could be a good moment to see what else is on the move across aerospace and defense stocks.

With RTX trading near its price target and sitting on strong recent returns, the big question now is simple: Is the stock still cheap based on today’s fundamentals, or is the market already pricing in all the future growth?

Most Popular Narrative: 1% Overvalued

With RTX last closing at about US$198.84 against a fair value estimate near US$197.11, the most followed narrative sees the share price sitting slightly ahead of its calculated value while still supported by detailed growth and margin assumptions.

Strategic portfolio optimization, with divestitures of non core assets (e.g. $1.8B sale of actuation business and $765M sale of Collins Simmonds Precision Products), is sharpening RTX's focus on core aerospace and defense, improving capital allocation and return on invested capital, and freeing balance sheet capacity for further innovation. All of these factors are presented as elements that could contribute to higher net margins and free cash flow over time.

Curious what kind of revenue trajectory, margin lift, and future earnings multiple have to line up to support that fair value so close to today’s price? The narrative runs the numbers segment by segment and even builds in a specific discount rate to bring those future cash flows back to today. If you want to see exactly which long term assumptions need to hold for RTX to justify that price tag, the full story is waiting.

Result: Fair Value of $197.11 (OVERVALUED)

However, you also have to keep an eye on jet engine reliability costs and any shift in defense budgets, which could pressure margins and weaken the current thesis.

Build Your Own RTX Narrative

If you look at the numbers and reach a different conclusion, or simply prefer to test your own assumptions, you can build a custom view in just a few minutes with Do it your way.

A great starting point for your RTX research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.