QS Research · Michael Burry's Scion Capital analyst template · 2006
RTX Corp (RTX)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case none · downside -25% · upside +7%
The market is not missing demand: Q3 2026 sales rose 11% (12% organic), FY2026 adjusted sales/EPS/FCF guidance was raised again, and backlog is a record $340B ($176B commercial/$164B defense). What it may be mispricing is the quality and price of that growth: TTM P/E is 30.4x and EV/EBITDA 18.1x versus prime peers at 13.2x-15.5x, Q3 2026 FCF fell 47% to $2.1B, TTM buybacks are $0, and $0.25 of the $2.26 adjusted Q3 EPS came from IEEPA recovery. On the section 13 TTM EBITDA base of $15.68B, 18.1x gives roughly today's price, 14.0x gives $142.45 (-24.8%) and 19.2x gives $202.87 (+7.0%), so the reward/risk at $189.53 is poor. This is a watch, not a short: base case is around today's multiple and upside still exists, but I need either a lower price or evidence that cash conversion normalizes before underwriting a long.
Key numbers
- Share price: $189.53
- Market cap: $255.76B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $95.99B
- EV / EBITDA (TTM): 18.1x
- P/E (TTM): 30.4x
- Price / book: 3.69x
The 15 boxes
- ✓ 1. Long-form business notes
RTX is a three-segment aerospace and defense company (Collins Aerospace, Pratt & Whitney, Raytheon) that sells original equipment plus aftermarket parts and services to commercial airframers, airlines and governments: U.S. government sales were $33,279M, or 38% of total net sales in FY2025, and international sales were $41,312M, or 47%. Between the FY2020 and FY2025 10-Ks the portfolio was consolidated from four reporting segments to three, while revenue rose from $64.39B in FY2021 to $88.60B in FY2025 and operating income from $5.14B to $9.30B (from a $1.89B operating loss in FY2020), with backlog of $268B at December 31, 2025. Cash economics in FY2025: $10.57B operating cash flow against $2.63B capex, but only $50M of buybacks versus $12.87B in FY2023. The business carries a 2024 legal/compliance overhang (two DOJ deferred prosecution agreements, an SEC administrative order, and a State Department consent agreement) with multi-year compliance obligations underway.
- ✓ 2. Competitive advantage
The filings describe no durable advantage: the FY2025 10-K says all of RTX's businesses are subject to significant competition, that customers can buy spare parts from suppliers other than the original equipment manufacturer, and that some non-U.S. rivals get government R&D and marketing subsidies a U.S. company does not. What the numbers show is scale with thin-to-moderate profitability: operating margin 5.2% to 10.5% across FY2021-FY2025, about 10.3% return on FY2025 net income of $6.73B against $65.25B total equity, and $10.57B FY2025 operating cash flow. Revenue rose from $64.39B (FY2021) to $88.60B (FY2025) and operating income from $5.14B to $9.30B, so the franchise is real, but the disclosure rests the barriers on regulatory approval to manufacture products and spare parts, not on brand, network or pricing power.
- ✓ 3. 10-Q takeaways
Q3 2026 was a strong quarter on the top line and in segment operating profit: consolidated sales of $24,965 million, up 11% (12% organic, +$2,611 million), with reported operating profit of $3,337 million (13.4% margin versus 11.2%) and GAAP EPS of $1.89 versus adjusted EPS of $2.26. Roughly $0.4 billion of IEEPA tariff refunds and $0.2 billion of investment gains helped the quarter, while a $0.4 billion Pratt & Whitney customer-bankruptcy charge and $0.3 billion of acquisition accounting adjustments hurt it, so the operating improvement sits well below the reported net income line's clean read-through. Cash was the weak spot: operating cash flow of $2.9 billion and free cash flow of $2.1 billion fell 38% and 47% versus Q3 2025. Guidance was raised for a second time in numeric terms: adjusted sales $97.0-$97.5 billion, adjusted EPS $7.65-$7.75 and free cash flow $9.0-$9.2 billion.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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