RTX Beats Q2, Raises Guidance as Pratt MRO Gains Offset Tariff Headwinds

What happened

RTX reported double-digit sales and earnings growth in Q2 2026, driven by strong aftermarket demand and defense bookings, and raised its full-year 2026 guidance for adjusted sales, adjusted EPS, and free cash flow. The quarter benefited from continued momentum at Raytheon, where munitions output rose over 40% year-over-year, and Pratt's MRO output growth of 23% YoY, but Pratt's commercial original equipment deliveries remained flat. Management now expects higher full-year free cash flow, indicating improved confidence in operational execution despite ongoing tariff costs of about $0.5 billion and a still-elevated customer compensation accrual tied to the powder-metal issue. Airbus continues to flag Pratt as a pacing item on the A320 ramp, and the stock's elevated valuation (35.8x P/E) already prices in a clean recovery, leaving limited near-term upside without further tangible proof of Pratt engine delivery normalization. The raised guidance supports the bull case but does not remove the key risks: Pratt OE deliveries must show sequential improvement, and the next Airbus update on July 29 will be critical to confirm whether Pratt's bottleneck is easing.

Implication

Investors should remain cautious: while RTX's backlog and defense momentum are strong, the elevated valuation (35.8x P/E) already reflects the guidance raise. The key binary catalysts are the upcoming Airbus report (July 29) and the next 10-Q showing GTF compensation reduction. Pratt's commercial OE deliveries need to show sequential growth for the stock to break out above $200. Without that, the risk/reward is skewed to the downside. Trim on strength above $210 and look to add near $175.

Thesis delta

The Q2 beat and raised guidance increase confidence in RTX's execution but do not alter the core thesis: the stock already prices a clean Pratt recovery. The key variable remains Pratt's ability to increase OE deliveries, which has not yet been proven. The wait rating remains appropriate until tangible evidence of Pratt bottleneck relief emerges.