RTX Corporation (RTX) settled at $175.06 on May 7, sitting inside a day range of $173.69 to $177.39 and continuing what has become a frustrating five-session losing streak despite one of the cleanest earnings prints in the entire defence sector this earnings cycle. RTX has fallen 11% in that stretch, and the decline has nothing to do with the actual quality of the business.

The Q1 2026 earnings report was comprehensive in its strength. Revenue came in at $22.1 billion, beating consensus of $21.55 billion by 3%. EPS of $1.78 cleared the $1.51 estimate by nearly 18% — a massive beat by any standard. Organic sales grew 10% across the company, with EBIT reaching $3 billion at a 13.7% margin, up from 13.1% in Q1 2025. Raytheon, the segment that sits most directly in the geopolitical demand cycle, was the standout. Munitions output grew over 40% year-on-year, with framework agreements signed for five critical programmes including Tomahawk, AMRAAM, and the Standard Missile family.

Raytheon’s book-to-bill over the trailing twelve months reached 1.48, meaning the company is booking significantly more business than it ships, and defence orders alone topped $6.6 billion in Q1. The US military’s use of more than 850 Tomahawk missiles in the Iran conflict has created urgent inventory replenishment demand that will take years to satisfy.

Management raised full-year profit and revenue guidance, citing double-digit organic growth continuing in both the defence and commercial aerospace segments. The Pratt & Whitney GTF Advantage engine received EASA certification, with entry into service expected later in 2026.

Collins Aerospace and Pratt & Whitney also secured an AirAsia X order for 150 Airbus A220 aircraft powered by GTF engines, with deliveries beginning in 2028. Free cash flow improved by $500 million year-on-year to $1.3 billion. The dividend of $0.73 per share for Q2 was declared, payable June 11.

So why did the stock fall? There are two explanations, and both matter. First, RTX disclosed that it has absorbed approximately $500 million in International Emergency Economic Powers Act tariff costs since those tariffs took effect, with the full-year tariff impact estimated at $850 million. That $850 million headwind — which was specifically excluded from the earnings guidance — is a real number that investors are now pricing into their models, even though management’s underlying guidance raise was made knowing that headwind exists. Second, and perhaps more significantly, signals of a potential ceasefire in the US-Iran conflict reduced the geopolitical premium that had been supporting defence stocks broadly. RTX had peaked at an all-time high of $214.50 in early March precisely because the Iran conflict created urgent demand for Raytheon’s missile systems. Any easing of that tension compresses the premium, even as the inventory replenishment argument remains fully intact.

At $175, the stock trades well below the average analyst price target of $216, with 15 out of 16 covering analysts maintaining a Buy rating. The 52-week range of $126.03 to $214.50 gives context: RTX is nearly $40 below its peak and $50 below where most of the Street thinks it should be. The underlying business — backlog, munitions output, commercial aerospace recovery — is executing. What RTX needs is a macro catalyst, specifically some combination of tariff clarity and a stabilisation in geopolitical sentiment, to close the gap between business performance and share price.