Raytheon Is Winning Billions in Defense Contracts — Should You Buy RTX Stock?

RTX Corporation (NYSE: RTX ) is increasingly benefiting from surging demand for missiles, air-defense systems, and other military equipment as geopolitical tensions rise and governments expand defense spending. The stock is already up about 9% year-to-date, as investors increasingly price in the company's growing defense backlog and stronger long-term demand.

On September 1, the U.S. Department of War awarded RTX Corporation (NYSE:RTX)'s Raytheon business a $42.48 million cost-plus-fixed-fee contract for technical and engineering services supporting Navy air-traffic systems. The work includes engineering and restoration services for air-traffic navigation and coordination systems.

While relatively small compared with Raytheon's larger weapons contracts, the award comes amid a broader acceleration in defense spending.

On August 17, Raytheon was awarded a $22.9 billion contract to accelerate production of Tomahawk cruise missiles. The agreement supports the annual production ramp-up of more than 1,000 Tomahawk missiles, along with associated support and services.

The company has also secured a $745 million contract from the Missile Defense Agency to produce SM-3 IIA missile interceptors. In addition, the U.S. Navy awarded Raytheon a $1.1 billion contract for AIM-9X Block II missiles.

Taken together, these awards demonstrate the breadth of demand across Raytheon's missile and air-defense portfolio. More importantly, the contracts are contributing to an already substantial backlog.

RTX exited the second quarter with approximately $119 billion in defense backlog. Raytheon also booked $19.9 billion in awards during the quarter, resulting in a book-to-bill ratio of approximately 2.4.

A book-to-bill ratio above 1 generally indicates that new orders are coming in faster than revenue is being recognized, providing greater visibility into future sales.

Production Expansion Could Support Future Growth

The company's decision to increase production suggests management expects elevated demand for missiles and air-defense systems to persist rather than represent a temporary spike. That could provide RTX with a multiyear growth opportunity as the U.S. and allied governments replenish weapons inventories and invest in new defense capabilities.

The Biggest Risk: Converting Backlog Into Profits

The key question for RTX Corporation (NYSE:RTX) is not simply how large its backlog becomes, but how quickly that backlog converts into revenue and at what margins.