RTX raises 2026 outlook after Q2 sales hit $24.7bn and backlog reaches $289bn

RTX Corporation (NYSE: RTX) posted its strongest quarterly print in several years, with second-quarter 2026 sales of $24.7 billion up 14 percent on a reported basis and 16 percent organically, adjusted earnings per share of $1.89 beating consensus by roughly 14 percent, and free cash flow of $2.9 billion versus an outflow of $72 million in the prior year quarter. The Arlington, Virginia-based aerospace and defence group also raised its full-year 2026 outlook across every headline metric and disclosed an agreement to sell Raytheon’s Blue Canyon Technologies business to Canadian space contractor MDA Space Ltd. for $620 million in cash. Chairman and Chief Executive Officer Chris Calio framed the quarter as evidence that RTX’s backlog, now at a record $289 billion, is beginning to convert into cash at a materially higher rate. The central tension for investors is whether the print represents a structural re-rating of RTX’s earnings power or a first-half surge that the company itself is guiding to decelerate into the second half. What follows is a segment-by-segment read of what actually drove the beat, and what still has to hold for the raised guide to land.

What do RTX’s Q2 2026 results reveal about the underlying operating momentum across all three segments?

The most defensible feature of the quarter is that every segment contributed to the beat rather than a single line doing the heavy lifting. Collins Aerospace grew reported sales 8 percent to $8.21 billion and 13 percent organically once 2025 divestitures are stripped out, with commercial original equipment volumes up 26 percent on narrowbody and widebody build rates, commercial aftermarket up 10 percent on parts, repair, and modifications, and defence sales up 7 percent. Adjusted operating profit at Collins reached $1.37 billion, with return on sales of 16.7 percent, 30 basis points above the prior year. Pratt & Whitney reported sales of $8.89 billion, up 16 percent, with commercial aftermarket sales climbing 25 percent and military sales rising 23 percent on higher F135 volume. Raytheon, the defence electronics arm, reported sales of $8.27 billion up 18 percent, driven by higher volume on Patriot, Standard Missile, and AMRAAM programmes, with adjusted return on sales expanding by 100 basis points year over year to 12.6 percent.

The three-segment margin lift, on top of the sales acceleration, is what makes the print harder to explain away as a one-off. Consolidated adjusted segment operating profit reached $3.15 billion in the quarter versus $2.67 billion a year earlier, a rise of 18 percent, and total segment operating margin expanded to 12.4 percent from 12.0 percent. RTX has now beaten consensus for five consecutive quarters, but the second-quarter print was the widest earnings beat in that run.

How did Pratt & Whitney’s 25 percent commercial aftermarket surge and its Geared Turbofan trade-off reshape the segment thesis?

Pratt & Whitney was the segment with the most complicated internal mix. The 25 percent commercial aftermarket increase reflects a sharp pick-up in maintenance, repair, and overhaul volume tied to the ongoing Geared Turbofan fleet management programme, where a rare condition in powder metal used to manufacture certain engine parts triggered an accelerated inspection cycle beginning in 2023. Management has told investors that year-to-date aircraft-on-ground counts related to the GTF issue are down roughly 25 percent, and that the segment is now deliberately redirecting engine material from spare-engine sales towards MRO shops. That trade-off is the reason commercial original equipment sales at Pratt fell 8 percent in the quarter even as commercial aftermarket ran up 25 percent.

The segment nonetheless expects to deliver a record number of GTF engines to Airbus in 2026, a message consistent with commercial narrowbody build rate assumptions across Collins Aerospace as well. Pratt’s adjusted operating profit of $740 million was up 22 percent, with return on sales of 8.3 percent, 30 basis points above the prior year. Military sales rose 23 percent on higher F135 volume, benefitting from prior-year contract award timing, and the company noted new selections including Jackson Square’s decision to specify Pratt & Whitney’s Geared Turbofan on Airbus A320neo aircraft and a $1 billion Joint Primary Aircraft Training System sustainment contract at Pratt & Whitney Canada. The read across the segment is that the aftermarket margin recovery is more mature than the OE margin recovery, and management is prioritising the former.

Why does Raytheon’s 18 percent sales growth and 100-basis-point margin lift matter for the defence rerating thesis?

Raytheon is the segment most tightly linked to the current geopolitical backdrop, and its numbers reinforced the narrative that international demand for integrated air and missile defence, naval strike, and munitions is translating into revenue rather than remaining stuck as backlog. Sales of $8.27 billion were up 18 percent on higher volume across land and air defence systems, naval programmes, and air and space defence systems. Adjusted operating profit of $1.04 billion was 29 percent above the prior year, with return on sales at 12.6 percent, one hundred basis points above the prior year and the best of the three segments on year-over-year expansion.

Management said Raytheon booked $20 billion of new awards in the second quarter alone, roughly half the roughly $43 billion of total new orders RTX has attributed to the group across the print. The defence-only portion of the total company backlog now stands at $119 billion, with the remaining $170 billion sitting in the commercial side of the group. The mix is important because commercial aftermarket, which is generally a higher-margin revenue stream than commercial original equipment, has been the driver of the earnings beat for several quarters, but Raytheon’s margin expansion suggests the defence side is now beginning to price and produce more efficiently as European rearmament, Middle East missile-defence, and Indo-Pacific integrated air defence programmes ramp.

What is the strategic significance of RTX’s agreement to sell Blue Canyon Technologies to MDA Space for $620 million?

Blue Canyon Technologies is a Colorado-based small-satellite manufacturer that Raytheon acquired in late 2020. The company designs spacecraft, satellite components including reaction wheels, star trackers, and control moment gyroscopes, and mission services. It has supported more than 85 spacecraft launches and, according to the Canadian buyer, has more than 3,500 products currently on orbit. Under the definitive agreement announced ahead of the Q2 print, MDA Space Ltd. (TSX: MDA; NYSE: MDA) has agreed to acquire 100 percent of the Blue Canyon membership interests for $620 million in cash, with completion expected by the end of 2026 subject to regulatory approvals and customary closing conditions.

For RTX, the divestiture continues a portfolio-management pattern of trimming non-core assets and concentrating capital on the three main franchises. Collins Aerospace, Pratt & Whitney, and Raytheon collectively generated $25.4 billion in segment sales in the quarter, so Blue Canyon’s contribution to Raytheon’s top line is small relative to the segment, but the proceeds add to a cash bridge that already includes a growing operating cash inflow. For MDA Space, the transaction is a much larger strategic bet. The Brampton, Ontario company said the deal will add roughly $3.5 billion to its sales pipeline and is fully financed with senior secured debt, with the acquisition expected to be accretive to adjusted EBITDA and adjusted earnings per share in 2027. Because the deal has been signed but not closed, RTX’s $620 million is a proposed inflow rather than a realised one.

How does the $2.9 billion free cash flow swing change RTX’s capital-return and balance-sheet trajectory?

The most eye-catching line on the RTX cash flow statement is the swing in operating cash flow to $3.55 billion in the second quarter from $458 million in the same quarter of 2025. After capital expenditures of $669 million, free cash flow reached $2.88 billion, compared with a $72 million outflow a year earlier. On a half-year view, operating cash flow rose to $5.40 billion from $1.76 billion, and free cash flow rose to $4.19 billion from $720 million.

Much of the improvement reflects working capital timing, particularly a $1.09 billion inflow from accounts receivable and a $2.10 billion swing in accounts payable and accrued liabilities. Contract assets moved against the number by $963 million, and inventory built by $330 million, both consistent with the volume ramp on both commercial and defence programmes. Cash and equivalents rose to $8.31 billion at 30 June 2026 from $7.44 billion at year-end 2025, and long-term debt fell to $31.86 billion from $34.29 billion, though roughly $5.30 billion of long-term debt is now classified as currently due. RTX paid $1.90 billion in dividends across the first half and did not repurchase stock, in contrast to the aggressive buyback pace of 2024. The quarterly dividend was declared at $0.73 per share, payable 3 September to holders of record on 14 August. The balance-sheet picture is one of a group deleveraging faster than expected while still funding a growing dividend, but with meaningful contract asset build that will need to convert to cash for the raised full-year FCF guide to land.

Why has RTX raised its 2026 outlook across sales, earnings, and free cash flow simultaneously?

RTX raised its full-year 2026 adjusted sales range to $95.0 billion to $96.0 billion from a prior range of $92.5 billion to $93.5 billion, lifted organic sales growth guidance to 8 to 9 percent from 5 to 6 percent, and raised the adjusted EPS range to $7.10 to $7.25 from $6.70 to $6.90. The free cash flow guide moved to $8.50 billion to $8.75 billion from $8.25 billion to $8.75 billion, tightening the range at the low end rather than lifting the top end.

The internal logic of the raise is straightforward. Organic growth in the first half ran ahead of the previous full-year guide, defence backlog conversion accelerated, and Pratt & Whitney’s aftermarket ramp compounded through the June quarter. However, the raised full-year 8 to 9 percent organic guide implies a materially slower second-half trajectory relative to the 16 percent organic growth just reported. Some of that deceleration is arithmetic, because prior-year comparatives become progressively harder in the second half of 2025, but the raised guide still requires the company to deliver another set of prints closer to consensus than to the second-quarter beat magnitude.

How is the market pricing RTX after the beat-and-raise print and the sector rotation into defence primes?

RTX shares closed at $208.48 on 23 July, up roughly 7 percent from a pre-print close of $194.80, and moved higher again to $212.79 on 24 July, a further 1.74 percent gain. Over the two-day window the stock rose roughly 9.2 percent, and it is now trading close to the $215 to $220 area where consensus price targets had converged ahead of the print. The one-year return on the shares is now around 30 percent, and RTX has clearly outperformed the broader market on the day of the release. Morningstar labels the stock as trading at a premium to its fair value estimate, while trade media reporting flagged strong upgrades from at least one broker and a pattern of upward estimate revisions likely in the weeks after the print.

The move should be read in the context of a broader sector rotation. Several large capital-intensive artificial-intelligence-linked names sold off on the same session, while defence primes, including Lockheed Martin and RTX, outperformed the S&P 500 by a wide margin. RTX’s low share-price beta relative to the market, its multi-year contracted revenue streams, and its exposure to government counterparties and geopolitical drivers rather than discretionary consumer demand explain part of the flow. However, a valuation now discounting continued double-digit organic growth would leave less room for disappointment on either the Pratt GTF fleet management timeline or Raytheon backlog conversion into 2027.

What execution risks and unresolved questions remain despite the strongest quarterly print in years?

Several risks sit outside the headline print. Pratt & Whitney’s GTF fleet management programme continues to require accelerated removals and inspections of a significant portion of the PW1100G-JM installed base, and management still classifies related matters as an ongoing risk factor. The powder-metal condition may yet extend to other engine models, which would affect the pace of aftermarket monetisation as well as customer relations. The company continues to disclose the effect of previously reported deferred prosecution agreements with the Department of Justice, an administrative order from the Securities and Exchange Commission, and a consent agreement with the Department of State, and it recorded a $69 million pre-tax charge in the quarter related to a litigation matter that management characterised as non-operational.

RTX also disclosed that acquisition accounting adjustments accounted for $474 million of non-GAAP add-backs in the quarter, and reported goodwill of $52.9 billion and intangible assets of $31.0 billion, both of which remain sensitive to any future impairment testing if defence backlog conversion falters or commercial aftermarket volume normalises earlier than expected. On the top line, foreign currency, sanctions and tariff regimes, and the health of a broadly stretched aerospace supply chain remain material risk factors. On the Blue Canyon transaction, the sale is signed but not closed, and the $620 million cash inflow is contingent on regulatory clearance for a Canadian buyer to acquire a US defence-adjacent manufacturer. That approval is not automatic in the current regulatory environment.

What are the key takeaways for investors weighing RTX’s beat-and-raise against the H2 organic growth deceleration guide?

• RTX Corporation reported Q2 2026 sales of $24.7 billion, up 14 percent reported and 16 percent organically, adjusted EPS of $1.89 up 21 percent year over year, and free cash flow of $2.88 billion versus a $72 million outflow in the prior year quarter.
• Company backlog reached a record $289 billion, comprising $170 billion of commercial and $119 billion of defence backlog, with Raytheon booking around $20 billion of new orders in the quarter.
• Every reportable segment expanded margin. Collins Aerospace adjusted return on sales rose 30 basis points to 16.7 percent, Pratt & Whitney rose 30 basis points to 8.3 percent, and Raytheon rose 100 basis points to 12.6 percent.
• RTX raised full-year 2026 adjusted sales guidance to $95.0 billion to $96.0 billion, organic sales growth to 8 to 9 percent, adjusted EPS to $7.10 to $7.25, and free cash flow to $8.50 billion to $8.75 billion.
• The raised full-year organic growth range implies a materially slower second-half trajectory than the 16 percent organic growth just reported, which is partly arithmetic on tougher prior-year comparatives and partly management discretion after five consecutive beats.
• Pratt & Whitney is deliberately shifting engine material from spare-engine sales into MRO shops as GTF aircraft-on-ground counts fall by roughly 25 percent year-to-date, which supports aftermarket margin at the cost of commercial original equipment sales.
• RTX has agreed to sell Raytheon’s Blue Canyon Technologies satellite bus and components business to MDA Space Ltd. for $620 million in cash, with completion expected by the end of 2026 subject to regulatory approvals, and the proceeds have not yet been received.
• Long-term debt fell to $31.86 billion at 30 June 2026 from $34.29 billion at year-end 2025, cash rose to $8.31 billion, and the quarterly dividend was reaffirmed at $0.73 per share.
• RTX shares closed at $212.79 on 24 July, up roughly 9.2 percent over the two sessions around the print, with consensus price targets now clustering near the $215 to $220 area and Morningstar flagging the stock as trading at a premium to fair value.
• The next measurable proof points are the Q3 2026 print, the closing of the Blue Canyon transaction and the associated cash inflow, continued conversion of Raytheon’s $119 billion defence backlog into revenue and margin, and further evidence that Pratt & Whitney’s GTF aftermarket surge can continue without a further step-up in commercial OE dilution.