RTX Corporation (NYSE: RTX) continues to secure major defense contracts at a rapid pace, yet CNBC’s Jim Cramer sees a complication holding the stock back from its full potential.
During the October 5 episode of Mad Money, a caller asked Cramer why RTX had recently shown signs of weakness, prompting him to address broader concerns about the direction of defense spending.
Cramer pushed back on the prevailing sentiment, stating: “Okay, so people feel that, for some reason, of which I disagree, that the defense budget has peaked and we’re not going to put any more money into defense, that enough has been spent. Meanwhile, RTX keeps getting contract after contract after contract.”
Supporting Cramer’s view, RTX’s Raytheon business announced on September 28 an AMRAAM production contract valued at up to $20.7 billion, covering five years with two additional option years.
The deal is designed to support a substantial increase in missile production capacity, though the maximum contract value should not be confused with revenue already earned by the company.
RTX reported second-quarter sales of approximately $24.7 billion, representing a 14% increase, while adjusted earnings per share came in at $1.89, up 21% from the prior year period.
The company’s backlog reached $289 billion, comprising $170 billion in commercial orders and $119 billion in defense orders, giving management confidence to raise its full-year adjusted EPS outlook to $7.10 to $7.25, up from $6.70 to $6.90.
Despite the strong defense pipeline, Cramer identified the company’s commercial aerospace exposure as a meaningful drag on investor sentiment and stock performance.
He explained his concern directly, saying: “However, it also has aerospace, commercial aerospace, and anything touching commercial aerospace has been weak because people feel with oil this high, it’s only a matter of time before the airlines cut their purchasing of planes.”
Cramer also tied his frustration to broader portfolio performance, admitting: “It has not happened, but my Charitable Trust has done very poorly in Boeing. I always like to play with an open hand. It’s done poorly, and it just bothers me tremendously. But RTX is pretty much in the same situation.”
On the Pratt & Whitney side, commercial aftermarket sales increased 25% in the latest quarter, even as commercial original-equipment sales declined 8%, illustrating the uneven nature of the commercial aviation recovery.
RTX also continues to absorb costs tied to the Pratt & Whitney powder-metal issue, with its second-quarter filing estimating an approximately $700 million cash impact in 2026, including customer credits and partner recovery timing.
From a valuation standpoint, RTX traded at approximately 24.9x forward earnings, sitting below GE Aerospace’s 36.9x multiple but above Lockheed Martin’s 16.6x, reflecting its dual exposure to commercial and defense markets.
On the institutional side, 92 hedge funds held RTX in the second quarter according to Insider Monkey, compared with 95 in the prior quarter, suggesting a modest pullback in hedge fund conviction.
Fisher Asset Management was the largest hedge fund holder with 22.9 million shares, while Point72 Asset Management and D E Shaw substantially increased their holdings by 62% and 116% respectively.
Short interest remained limited at 1.01% of the float, indicating that bearish direct positioning in the stock has not surged despite the recent weakness Cramer discussed on his program.
RTX’s sprawling $289 billion backlog provides significant revenue visibility, but the path to translating those orders into earnings requires managing engine-related costs alongside the uncertainties of commercial aviation demand.
Cramer’s thesis on continued defense spending remains intact, yet shareholders must still weigh the commercial aerospace headwinds that complicate the investment case for this defense and aerospace giant.
