RTX surges on Trump arms export policy, production expansion
Defense contractor boosts missile output under landmark agreements following new 'America First' strategy
Raytheon Technologies shares rallied 1.4% on Thursday, extending gains after the defense contractor secured landmark production agreements that align with President Donald Trump's newly signed "America First Arms Transfer Strategy." The stock climbed to $198.66, adding to its recent momentum amid growing optimism about the company's role in expanding America's defense industrial base.
The rally follows Trump's signing of an executive order establishing the arms transfer strategy, which prioritizes U.S. production interests in foreign weapons sales and creates a "sales catalog of prioritized platforms" for allies and partners. The policy aims to leverage foreign purchases to build American production capacity, a shift that positions major contractors like RTX to benefit from increased international demand.
Just days before the executive order, RTX's Raytheon subsidiary announced five multi-year framework agreements with the U.S. Department of War to dramatically expand production of critical munitions. The deals, which can span up to seven years, will increase annual output of Tomahawk cruise missiles to more than 1,000 units, Advanced Medium-Range Air-to-Air Missiles (AMRAAMs) to at least 1,900, and Standard Missile-6 interceptors to over 500. These represent 2- to 4-fold increases over existing production rates.
The production expansion aligns directly with the administration's focus on strengthening the domestic defense industrial base. Under the new strategy, countries that invest heavily in their own self-defense capabilities and hold critical strategic importance will receive priority in arms sales deals. This approach is designed to ensure the U.S. defense industrial base has capacity to support American military needs while also supplying allies.
RTX plans to increase capital investments in facilities and factories from $2.6 billion to $3.1 billion in 2026 to support the production ramp-up, utilizing a collaborative funding approach designed to preserve upfront free cash flow. Manufacturing activities under the agreements will occur at Raytheon facilities in Tucson, Arizona; Huntsville, Alabama; and Andover, Massachusetts.
Analysts have responded positively to the developments. Bank of America Securities raised its price target to $230 from $215, maintaining a "Buy" rating, while Morgan Stanley elevated its target to $235 with an "Overweight" rating. Bernstein increased its target to $204 from $189, and Argus adjusted its target upward to $230 from $195. The median price target among Wall Street analysts now stands at $225, suggesting potential upside of approximately 14% from current levels.
The bullish sentiment comes on top of RTX's strong fourth-quarter 2025 performance, where the company reported adjusted earnings per share of $1.55 on revenue of $24.2 billion, exceeding analyst expectations. RTX also provided an encouraging outlook for 2026, targeting adjusted sales between $92.0 billion and $93.0 billion with adjusted EPS in the range of $6.60 to $6.80.
The new arms export strategy and accompanying production agreements mark a significant shift in how the U.S. approaches foreign military sales. Rather than treating exports as secondary to domestic requirements, the policy explicitly uses international demand to bolster American manufacturing capacity. For RTX, with its $262.8 billion market capitalization and extensive portfolio of missile systems, this creates a powerful growth driver that could sustain momentum well beyond the current production expansion cycle.
The company's shares have gained roughly 79% over the past 12 months, dramatically outperforming the broader market. Trading near its 52-week high of $206.48 and well above the year's low of $110.77, RTX reflects growing investor confidence in the defense sector's long-term prospects amid rising global tensions and increased allied defense spending.