RTX's $289 Billion Backlog, Explained |

RTX (RTX -0.97%) is one of the world’s largest defense companies by revenue, and it’s posting strong sales and earnings growth amid a tense geopolitical backdrop and rising military spending. The company’s revenue rose 14% year over year to $24.7 billion in the second quarter, and non-GAAP (generally accepted accounting principles) adjusted earnings per share increased 21% to $1.89.

Strikingly, the company’s backlog — deals that have been signed but not yet delivered or recorded as revenue — increased by 22% compared to the prior-year period, reaching $289 billion. But while RTX’s massive backlog is undeniably impressive, its composition might not be what you would expect.

RTX isn’t just a defense leader. The company also operates a commercial aerospace division, which accounted for 48% of overall revenue in its last fiscal year.

As of the company’s second-quarter report, roughly 60% of its $289 billion backlog was orders for its commercial aerospace business — with the remaining 40% coming from defense orders. The key takeaway here is that RTX’s order book is actually meaningfully diversified, and the backlog suggests a strong sales outlook in the coming years.

Its backlog is likely even stronger than reported for Q2, with the company recently announcing it had secured a seven-year contract to provide Tomahawk cruise missiles to the U.S. military. The contract is worth $22.9 billion over the stretch.

RTX’s latest guidance update calls for sales to come in between $95 billion and $96 billion this year. With the company’s backlog showing a robust order pipeline and catalysts that could continue to push defense orders higher, the business has solid foundations and an encouraging growth outlook.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends RTX. The Motley Fool has a disclosure policy.