RTX

We rate RAYTHEON TECHNOLOGIES CORP (RTX) as a Hold with a composite score of 62.6/100 at a current price of $198.44. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (92th percentile) and momentum (71th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (46/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

RAYTHEON TECHNOLOGIES CORP holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 62.6/100 places it at rank #454 in our full 7,333-stock universe. As a mega-cap company with a $224.0B market capitalization, RAYTHEON TECHNOLOGIES CORP benefits from significant scale, distribution networks, and brand recognition that smaller competitors cannot easily replicate.

The outlook is moderately positive, with revenue expanding at 14% and favorable momentum (71th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 20% (-22.5pp vs sector) narrow to operating margins of 10% (+9.0pp vs sector) and net margins of 8.1%, yielding a gross-to-net conversion rate of 41%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $198.44, RAYTHEON TECHNOLOGIES CORP is trading near fair value based on current fundamentals. Our value factor score of 65/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 39.9x (a 79% premium to the sector median of 22.3x), EV/EBITDA of 31.5x (at a premium), P/B of 4.1x, P/S of 3.3x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to RAYTHEON TECHNOLOGIES CORP. The stock presents a balanced risk profile: significant leverage (155% debt-to-equity) and low beta of 0.56 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (155% debt-to-equity); low beta of 0.56 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 92th percentile and quality factor at the 52th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (92th percentile) suggests predictable business dynamics; large-cap scale ($224.0B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate RAYTHEON TECHNOLOGIES CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 10.3%, and the balance sheet is managed within acceptable parameters (D/E: 155%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; RAYTHEON TECHNOLOGIES CORP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.57% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, RAYTHEON TECHNOLOGIES CORP receives a Hold rating with a composite score of 62.6/100 (rank #454 of 7,333). Our quantitative framework assigns a Narrow Moat (46/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 65/100.

Our analysis supports a neutral stance on RAYTHEON TECHNOLOGIES CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.