Rtx Corp. stock breaks all-time high: Should you buy?

By:
on May 28, 2024
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  • RTX surges on robust earnings, hitting new all-time high.
  • Bullish outlook supported by strong fundamentals and growth prospects.
  • Bulls are in charge above $105.2.

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RTX Corporation (NYSE:RTX) has been on an impressive upward trajectory recently, with its stock price breaking above its previous all-time high of $106.02 set in April 2022. This breakout comes on the back of strong financial performance and positive market sentiment, pushing the stock to new heights. Investors have shown renewed confidence in RTX, driving the stock up by more than 26% since the beginning of the year, significantly outperforming both the broader aerospace & defense sector as well as the S&P 500.

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Strong financial health and growth prospects

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The company’s latest earnings report highlighted robust financial health, with RTX posting revenues of $19.3 billion in the first quarter of 2024, up 12.2% year-over-year. Adjusted earnings per share came in at $1.34, surpassing analysts’ expectations by $0.11.

This strong performance was driven by a surge in original equipment sales, particularly at Pratt & Whitney, offsetting the expected normalization in aftermarket services. The company’s backlog remains strong at $202 billion, indicating sustained demand in both commercial and defense sectors.

RTX’s fundamentals continue to impress, with the company reaffirming its full-year 2024 guidance. RTX expects sales between $78.0 billion and $79.0 billion and free cash flow of approximately $5.7 billion. This optimistic outlook is underpinned by strong order volumes and efficient execution across its key business segments, despite some ongoing challenges with the Pratt & Whitney GTF engines.

Valuation-wise, while RTX’s stock is trading near the upper bounds of its historical fair value range, the company’s earnings growth potential and substantial free cash flow support a bullish stance. Analysts project earnings to grow by about 6.6% this year and to accelerate by 13.3% in 2025, further bolstered by continued dividend increases and share buyback programs.

Given this backdrop of strong financial performance, robust growth prospects, and positive market sentiment, RTX seems poised for further gains. With the stock recently breaking its all-time high, investors might find current price levels appealing. As we look ahead, it’s crucial to dive into the technical analysis to pinpoint potential price movements and identify strategic entry points for those wanting to ride this momentum.

Bulls take charge: What’s next for RTX?

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In our previous article on Rtx Corp., ‘Rtx Corp is up 19% year-to-date: Should you sell or hold?’ we highlighted how $105.2 was acting as a major resistance for the stock and mentioned:

“For investors and long-term shareholders, as long as the stock doesn’t break above $105.2 and closes above it, it can remain range-bound in the medium term. Hence, buying is advisable only above that level.”

RTX chart by TradingView
Now that Rtx’s stock has given a closing above $105.2, bulls are in charge. However, the long-term RSI indicator is currently in the overbought zone, which means the stock can see a pullback or consolidation in the near term and cool down a bit.

Investors who are bullish on the stock can buy it at current levels or wait for a pullback near $100 to buy it with a stop loss at $91.4. If the stock keeps marching upward, it can climb all the way up to the $128.7 level, where profits can be booked.

Traders who want to bet against the stock must wait for it to see if it consolidates near current levels in the coming weeks or breaks below $99.4. In either of those cases, they can short the stock while keeping a stop loss a few cents above the all-time high. If the stock falls below $99.4, its next stop will be at $91.9 and $87.64, where they can book profits.

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