S&P Global Ratings revised its view on RTX Corp. to positive from stable and reaffirmed the company's BBB+ long-term issuer credit rating and A-2 short-term rating. The ratings firm said it expects RTX to maintain leverage under 2.5x and funds from operations to debt above 30% as demand across aerospace and defense bolsters cash generation.
On the commercial side, S&P highlighted resilient air traffic volumes that are underpinning demand for new aircraft and aftermarket parts and services. RTX produces avionics, components and cabin interiors for both widebody and narrowbody airliners through its Collins unit. Through Pratt & Whitney, the company supplies engines for roughly 40% of new Airbus A320 family deliveries. S&P noted that RTX's extensive installed base of engines and components creates a steady stream of maintenance, repair and replacement revenue that is less dependent on the timing of new-aircraft deliveries.
Defense activity also plays a central role in the ratings action. Military products represent about half of RTX's sales. The company has reached framework agreements with the U.S. Department of Defense to expand production capacity and speed deliveries of key munitions, including Tomahawk, AMRAAM, Standard Missile 6 and Standard Missile-3 interceptors. Those agreements are expected to expand production by two to four times over periods of up to seven years. S&P pointed to the White House's 2027 budget proposal, which includes a near $1.5 trillion defense request, described in the proposal as roughly a 44% increase over 2026 levels.
Operationally, Pratt & Whitney is more than halfway through a remediation program for PW1100 geared turbofan engines tied to a manufacturing defect disclosed in July 2023. S&P reported that the number of grounded aircraft has declined by 15% since the end of 2026 as inspections and repairs progress. The ratings firm estimates that approximately $800 million in compensation remains owed to airline customers related to the issue.
On the balance-sheet front, RTX is on track to repay the remaining $3.4 billion of debt associated with accelerated share repurchases this year, using a portion of more than $8 billion in forecasted free operating cash flow. S&P expects the company to continue dividend payments, forecasting about $3.7 billion in dividends in 2026. The agency further projects improved credit metrics for the year, with debt-to-EBITDA falling below 2.5x and funds from operations to debt moving into the mid-30% range.
Implications for markets and sectors are centered on commercial aerospace and defense suppliers, as well as capital markets that track corporate credit metrics. The ratings agency's positive outlook reflects expectations for predictable aftermarket revenue and meaningful defense production ramps that support cash flow and deleveraging.