RTX Corporation (NYSE: RTX) saw its shares hovering near $174 on Monday following a downgrade from Erste Group Bank, which lowered its rating on the defense and aerospace giant to “hold” from “buy.” The downgrade comes on the heels of a sharp 11.3% decline over the previous five trading sessions, a move that erased approximately $30 billion in market capitalization and brought the company’s valuation to around $235 billion.
The downgrade is particularly notable because it follows RTX’s first-quarter earnings report, which exceeded analyst expectations. The company reported sales of $22.1 billion, a 9% increase year-over-year, and adjusted earnings per share of $1.78, up 21% from the prior year. RTX also raised its full-year 2026 outlook, now projecting adjusted sales in the range of $92.5 billion to $93.5 billion and adjusted EPS between $6.70 and $6.90.
Despite these positive fundamentals, the market remains skeptical. Tariff costs remain a significant overhang, with CFO Neil Mitchill noting that the company has paid approximately $500 million in tariffs under the International Emergency Economic Powers Act. RTX is pursuing refunds but has not recognized any income from potential reversals, and these possible refunds are not included in current guidance.
Erste Group’s downgrade contrasts with the broader analyst consensus, which still rates RTX as a “Moderate Buy.” According to MarketBeat, 13 analysts rate the stock a buy, seven recommend hold, one rates it a strong buy, and only one suggests selling. The downgrade follows Erste’s initiation of coverage with a “buy” rating just over a month ago, on March 24.
RTX’s quarterly performance was driven by strength across its portfolio. Raytheon saw a 10% revenue increase, fueled by demand for land and air defense systems such as Patriot and GEM-T missiles. Pratt & Whitney posted an 11% revenue gain, with commercial aftermarket sales jumping 19%. Collins Aerospace reported a 5% sales increase. The company’s backlog stood at $271 billion, split between $162 billion in commercial and $109 billion in defense.
However, concerns about valuation and the broader defense sector are weighing on sentiment. Despite surging weapons demand, major defense stocks including Lockheed Martin, Northrop Grumman, General Dynamics, and L3Harris are trading well below their post-Iran-war headlines highs. The market appears to have already priced in much of the anticipated boost from increased defense spending.
Analysts note that while RTX’s demand outlook remains strong, the key challenge is converting its massive backlog into cash efficiently and without disruptions. Tariffs, higher engine costs, and sector rotation are causing investors to reassess the stock’s valuation. Technical analysis from Traders Union highlighted $177.60 as a key support level; with shares trading below that mark, near-term momentum remains uncertain.
The broader market context adds to the pressure. The S&P 500 edged up 0.5% during the same period, while RTX’s 11% drop underperformed significantly. Northrop Grumman also declined 5% last week despite a stronger first-quarter revenue report, underscoring the broader headwinds facing defense stocks.
RTX’s CEO Chris Calio described the quarter as a “very strong start” to 2026, citing strength in defense operations. But the market is demanding more than just strong results—it wants clarity on tariffs and a clear path to converting backlog into cash. Until those uncertainties are resolved, the stock may remain under pressure.
