RTX vs Lockheed Martin: Which Defense Stock Is the Stronger Player Now?

Aparajita Dutta August 26, 2025

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Key Takeaways

RTX holds stronger liquidity with $4.78B cash vs Lockheed's $1.29B and higher debt load.
RTX benefits from commercial aviation growth, while Lockheed remains defense-focused.
Lockheed trades at a lower earnings multiple and delivers a higher return on equity than RTX.

With rising global defense budgets and increased focus on military modernization, defense contractors like RTX Corp. ((RTX - Free Report) ) and Lockheed Martin Corp. ((LMT - Free Report) ) are witnessing sustained demand for next-generation aircraft, missile systems and critical defense technologies. Their strong backlog of government contracts ensures revenue visibility and positions them to capitalize on long-term security spending trends.

Notably, RTX offers a diversified portfolio with products ranging from commercial jet engines and avionics to space sensors, military radars, and Satcom systems. Lockheed, on the other hand, is a renowned provider of flagship defense programs like the F-35 fighter jet, Patriot and THAAD missiles, as well as littoral combat vessels, along with cutting-edge space solutions like the Orion spacecraft.

As expanding defense budgets worldwide, coupled with growing hostilities and the advent of modern military technologies, pave the way for sustained growth for both RTX and LMT, defense investors may find themselves in a quandary over which company to invest in right now. The answer is discussed below in terms of their strengths and weaknesses.

Financial Stability & Growth Drivers: RTX vs LMT

As of the second quarter of 2025, RTX held cash and cash equivalents worth $4.78 billion, with a current debt value of $3.72 billion remaining well below its cash reserve. This reflects a solid liquidity position for the stock. Also, RTX’s current ratio of 1.01 (as of June 30, 2025), being more than 1, reflects that it has sufficient capital to pay off its short-term debt obligations.

Such a solid financial position and a robust cash flow of $1.76 billion from operating activities enable RTX to make shareholder-friendly decisions. Notably, RTX repurchased shares worth $50 million and paid dividends worth $1.75 billion in the first six months of 2025.

In contrast, Lockheed’s cash and cash equivalents at the end of the second quarter of 2025 totaled $1.29 billion. Its long-term debt, as of June 29, 2025, amounted to $18.52 billion, while its current debt was $3.12 billion. With both its long-term and current debt values exceeding its cash balance amount, it is reasonable to conclude that the stock holds a poor solvency position. Further, its cash flow from operations declined year over year to $1.61 billion at the end of June 2025, which further raises a red flag about its liquidity.

Despite repurchasing $1.25 billion in shares and paying $1.57 billion in dividends in the first half of 2025, Lockheed’s weak financial condition may hinder its ability to sustain such shareholder rewards going forward.

As far as growth catalysts are concerned, both LMT and RTX are poised to benefit from the expanding U.S. defense budget. In May 2025, the White House proposed a 13% increase in defense spending to $1.01 trillion for fiscal 2026. In particular, this budget proposal prioritizes investment in U.S. space dominance with a proposed funding worth $40 billion toward the Space Force, which represents a 30% increase in funding from fiscal 2025. It also includes funding provision of $25 billion for the proposed Golden Dome — a next-generation missile defense shield — as well as $2.5 billion for missile and munitions production expansion for the missile defense initiative.

With both RTX and Lockheed being prominent defense contractors, with established footprints in missile defense and strong positions in space exploration, the enhanced funding provisions offered by the U.S. government should significantly boost their revenue growth in the coming quarters.

For RTX, a steadily improving commercial air traffic acts as an additional major growth headwind, unlike that for LMT, whose revenues are primarily defense-focused. Notably, RTX’s second-quarter 2025 results reflected solid organic year-over-year sales growth of 9%. A major portion of this improvement was driven by double-digit growth witnessed in the company’s commercial aftermarket sales, along with a high-single-digit increase in commercial OEM sales. With the International Air Transport Association (“IATA”) projecting 5.8% year-over-year passenger traffic growth in 2025, RTX remains well-positioned to capitalize on strengthening commercial aviation trends.

Risks of Investing in RTX vs Lockheed

RTX’s exposure to the commercial aviation industry makes it more vulnerable to supply-chain constraints that have been impacting the commercial side of the aerospace sector more than the defense side, somewhat cushioned with government support. To this end, IATA predicts that airlines are short of 5,400 aircraft, assuming this backlog increase was induced solely by delivery delays.

Given the expected annual production of around 2,000 aircraft, IATA projects that it would take 3-5 years to clear this huge amount of backlog. This, in turn, poses a near-term threat to RTX by prolonging its revenue realization from engine sales and amplifying supply-side pressures in an already constrained production environment.

Meanwhile, both Lockheed and RTX are contending with broader industry challenges, including labor shortages. As per the 2025 Workforce Study report released by the Aerospace Industries Association (“AIA”), in collaboration with McKinsey, although the attrition rate in the industry has dropped from a peak of 17% in 2022 to approximately 14.5% in 2024, it remains significantly higher than the average of other U.S. industries that range between 2.5% and 7%.

Such a higher-than-average attrition rate in the aerospace-defense industry can lead to production delays and quality control issues due to the loss of experienced talent. Such persistent labor challenges might affect defense manufacturing stocks like Lockheed and RTX in not being able to deliver the finished products in the stipulated timeline. This, in turn, may hurt their future operating results.

How Do Zacks Estimates Compare for RTX & LMT?

The Zacks Consensus Estimate for RTX’s 2025 sales and earnings per share (EPS) implies an improvement of 6.1% and 3.5%, respectively, from the year-ago quarter’s reported figures. However, RTX’s EPS estimates have moved south over the past 60 days.