RTX Corporation (NYSE: RTX) is capitalizing on surging demand for aircraft replacement parts, repairs, and avionics upgrades across both commercial and military aviation markets.

Higher production volumes for narrow-body and wide-body aircraft, combined with robust demand for new engines, continue to support the company’s long-term growth prospects.

Despite a roughly 1% decline in the stock year-to-date, RTX has significantly outperformed the S&P 500 aerospace and defense sector, which has recorded a 9% loss over the same period.

That relative strength reflects growing investor confidence in the durability of aftermarket services as a revenue engine, independent of new aircraft delivery cycles.

The company’s Pratt and Whitney segment, which manufactures commercial and military aircraft engines, posted 16% sales growth in the second quarter to $8.89 billion, with adjusted profit up 22% and an operating margin of 8.3%.

RTX has already announced a $25 million investment plan to expand manufacturing in Poland, responding directly to accelerating demand across its engine and maintenance operations.

Collins Aerospace, which supplies avionics, flight controls, and aircraft interiors, achieved 8% sales growth in the second quarter, with profit growing 10% and an operating margin of 16.7%.

Following its October 20 third-quarter results, RTX raised its 2026 adjusted sales guidance to between $97 billion and $97.5 billion, with adjusted EPS outlook set at $7.65 to $7.75 and organic sales growth expected at 10% to 11%.

Despite its strong operational performance, the stock has pulled back roughly 37% from its all-time highs, with valuation concerns cited as a key factor weighing on sentiment.

At a price-to-earnings multiple of 33x, RTX trades well above the sector median of 20x, and its price-to-sales ratio of 2.78x compares unfavorably to the sector average of 1.77x.

The company’s order backlog of more than $200 billion provides substantial visibility into future demand, though converting that backlog into free cash flow remains a critical execution challenge.

Free cash flow rose sharply to $2.88 billion in the second quarter, up from negative $72 million in the same period a year earlier, while first-half cash flow improved to $4.18 billion from $720 million.

That improvement in cash generation directly underpins the company’s dividend program, with RTX distributing nearly half of its earnings to shareholders at a current yield of approximately 1.56%.

The quarterly dividend payout has increased from $0.63 per share in early 2025 to $0.73 per share, translating to an annualized rate of $2.92 per share.

On the institutional side, the number of hedge funds holding RTX stakes declined modestly to 92 in the second quarter from 95 in the first quarter, though key managers added significantly to their positions.

Fisher Asset Management increased its stake by 3% to $4.34 million, while Point72 Asset Management expanded its position by 62% to $625.75 million, signaling continued conviction among major investors.

Short interest in the stock remains low at 1.01%, even as shares held short increased to 13.65 million as of September 30 from 12.34 million as of August 31.

RTX’s combination of margin expansion, revenue growth, and improving free cash flow positions it as one of the more resilient dividend plays in the aerospace and defense sector.

Sustaining the stock’s premium valuation, however, will require continued execution on revenue growth, profitability improvement, and consistent free cash flow generation across its business segments.