In this piece, we will take a look at 10 best defense stocks to buy now.
As we move into 2025 and beyond, the defense industry stands at a critical juncture, where technological advancements, evolving geopolitical threats, and increased spending from both public and private sectors are converging to shape the future of aerospace and defense (A&D). The years ahead promise significant growth opportunities for companies within the sector, especially those positioned at the forefront of innovation and strategic alignment. This article aims to provide a detailed overview of the best investment opportunities in the defense sector, which will be heavily influenced by emerging technologies, hypersonic developments, and the ongoing digital transformation of the industry.
According to Deloitte, one of the most exciting developments shaping the defense landscape in years ahead is the emergence of supersonic and hypersonic technologies. NASA’s X-59 QueSST program has been pushing the boundaries of quiet supersonic travel, aiming to reduce sonic boom intensity and revolutionize high-speed aviation. While this technology is still in its nascent stages, manufacturers are optimistic about its potential, having already secured significant investments and collaborations with major airlines. This optimism reflects the increasing recognition that supersonic travel may not just be a technological marvel but an economically viable solution for future air travel.
In addition to supersonic travel, the defense sector is witnessing an unparalleled surge in demand for hypersonic technology, both for offensive and defensive purposes. The U.S. Department of Defense (DOD) has allocated a substantial budget in fiscal year 2024 to develop and test hypersonic capabilities, including glide vehicles and cruise missiles. As this technology inches closer to operationalization, defense companies are expected to accelerate their efforts to bring hypersonic weapons systems to market, which will likely drive growth in the sector for years to come.
Looking ahead, the A&D industry’s growth will be driven by a combination of defense and commercial spending. With escalating geopolitical tensions, the demand for next-generation defense capabilities is at an all-time high. The global defense budget surpassed $2.24 trillion in 2022, and the U.S. DOD has requested $842 billion for fiscal year 2024, a 3.2% increase from the previous year. This funding surge is set to propel innovation in areas such as artificial intelligence (AI), advanced technologies, and the modernization of air, ground, and naval vehicles, all of which will play a crucial role in shaping the defense sector over the next decade.
Investors should pay close attention to companies involved in the defense supply chain, particularly those engaged in research and development (R&D) of cutting-edge defense equipment. The DOD’s emphasis on AI, microelectronics, quantum computing, and advanced propulsion systems is expected to fuel rapid technological advancements. By focusing on these areas, defense firms can maintain their competitive edge, providing ample opportunities for investors looking to capitalize on the sector’s growth potential.
In addition to traditional defense technologies, the space sector is becoming an increasingly important part of the A&D industry’s future. U.S. spending on space-related defense initiatives has risen sharply, with the U.S. Space Force (USSF) requesting $30.1 billion for fiscal year 2024. This represents a 15% increase from the previous year, and the trend is expected to continue into 2025 and beyond as the U.S. works to maintain its strategic advantage in space. Investments in cybersecurity, space exploration, and resilient space forces will remain a key focus, positioning companies in the space and defense sectors for long-term growth.
While the defense industry is set to thrive in the coming years, it is not without its challenges. Inflation, which has been a persistent issue in recent years, is expected to remain a concern as the industry grapples with the rising costs of materials and production. In real terms, the U.S. defense budget increase of 3.2% for fiscal year 2024 may be overshadowed by inflation rates, currently hovering around 6%. This could limit the DOD’s flexibility in launching new missions or advancing certain technologies, as resources are reallocated to cover essential operational costs. Despite these headwinds, companies that can innovate and streamline their supply chains will likely find ways to mitigate these risks.
Commercial aerospace is another area that will see significant investment in the years to come. The recovery of international and domestic passenger traffic to pre-pandemic levels is projected to drive new aircraft orders, with increased spending on digitalization, new product development, and next-generation technologies like Advanced Air Mobility (AAM) and space exploration. Companies that can tap into these emerging markets will find themselves well-positioned to benefit from the broader recovery of the aerospace sector.
Moving forward, the AAM sector, in particular, is expected to transition from R&D to full-scale manufacturing and commercialization. Aircraft manufacturers are targeting type certification for their AAM vehicles, with the first wave of commercialization anticipated in 2025. To support these efforts, substantial investments in infrastructure—such as vertiports, charging stations, and pilot training facilities—are expected to drive long-term growth in this emerging market. Companies that position themselves as leaders in AAM technology will be at the forefront of this transformation, offering attractive investment opportunities for those with a forward-looking perspective.
The future of the defense industry also hinges on the successful integration of digital tools throughout the supply chain. The concept of the “digital thread,” which connects engineering, manufacturing, and aftermarket activities, is becoming increasingly important as companies look to streamline their operations and reduce time-to-market for new products. By embracing digital transformation, A&D companies can accelerate the certification and commercialization of new technologies, providing a significant competitive advantage in a rapidly evolving industry.
Furthermore, the importance of cybersecurity in the defense sector cannot be overstated. As the industry becomes more digitally interconnected, the risk of cyberattacks increases. In response, defense companies are expected to invest heavily in cyber-resiliency measures to protect sensitive data and critical infrastructure. This focus on cybersecurity will be particularly relevant in 2025 and beyond, as companies work to safeguard their operations against increasingly sophisticated cyber threats.
In addition to technology and innovation, geopolitical factors will continue to shape the defense industry in years ahead. The ongoing conflict between Russia and Ukraine, tensions in the South China Sea, and the broader competition for global dominance between the U.S. and China are expected to drive further increases in defense spending. The U.S. DOD is investing heavily in next-generation technologies to maintain its strategic advantage in these areas, with a focus on AI, quantum computing, and space capabilities.
Moreover, the private sector’s role in defense innovation is expected to grow as the DOD continues to engage with small businesses, startups, and academia to accelerate the integration of emerging technologies. Initiatives like the Defense Innovation Unit (DIU) and AFWERX are helping to bridge the gap between the government and the private sector, fostering innovation and driving growth in the defense industry.
For investors, companies that can successfully navigate these partnerships and bring new technologies to market will offer compelling investment opportunities. As the defense industry looks toward the future, the companies that can embrace technological advancements, adapt to changing geopolitical dynamics, and manage inflationary pressures will be best positioned for long-term success. For investors, identifying the best defense stocks to buy now will require a keen understanding of these trends and an eye for companies that are leading the charge in innovation, digital transformation, and operational excellence.
This article will explore the top 10 defense stocks poised for growth, highlighting companies that are capitalizing on emerging technologies, expanding their presence in key markets, and delivering strong financial performance.
A military personnel in gear next to a shoulder-fired launcher, representing the company’s less-lethal defense technology.
Our Methodology
For this article we first screened for companies operating in the defense sector and picked the 30 largest companies operating in the space. We then sourced the hedge fund sentiment for these companies from Insider Monkey’s proprietary database of 912 elite money managers. We narrowed down our selection to stocks that were the most widely-held by hedge funds and then ranked them in ascending order of the number of hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. L3Harris Technologies, Inc. (NYSE:LHX)
Number of Hedge Fund Holders: 40
L3Harris Technologies, Inc. (NYSE:LHX) is a prominent player in the defense sector, delivering advanced defense and commercial technologies across the air, land, sea, space, and cyber domains. With its broad portfolio spanning Integrated Mission Systems, Space and Airborne Systems, Communication Systems, and Aviation Systems, the company serves critical national security needs, making it a key inclusion in the list of best defense stocks. Its product lines, such as multi-mission ISR, space payloads, avionics, and tactical communications, support vital defense initiatives, providing long-term growth opportunities.
In Q2 2024, L3Harris Technologies, Inc. (NYSE:LHX) reported solid financial performance, highlighting its strength in execution and growth potential. The company saw revenue growth of 13%, or 1% organically, driven by strong demand across defense programs. The Integrated Mission Systems segment saw high demand for maritime and ISR systems, while Space and Airborne Systems benefited from contracts in space payloads and avionics solutions. Notably, the Communications Systems segment ended the quarter with a record $6 billion backlog, reflecting robust demand for resilient communication products among U.S. Department of Defense (DoD) and international clients. The company’s total backlog stands at $32 billion, underscoring future revenue visibility.
Operating margins for Q2 were 15.6%, up by 80 basis points from the previous year, indicating improved operational efficiency and effective cost management through the L3Harris Technologies, Inc. (NYSE:LHX) NeXt initiative. L3Harris Technologies, Inc. (NYSE:LHX) achieved non-GAAP earnings per share (EPS) of $3.24, a 9% increase, highlighting its focus on delivering shareholder value. The company also maintained a healthy balance sheet, reducing net leverage to 3.2x by repaying $350 million in debt during the quarter.
The acquisition of Aerojet Rocketdyne last year continues to pay off, contributing approximately $600 million in revenue in Q2. This acquisition bolsters L3Harris’s presence in missile platforms and positions it for future growth in missile defense, leveraging its propulsion technology. L3Harris Technologies, Inc. (NYSE:LHX) strong financial metrics, robust order pipeline, and continued investment in strategic defense technologies make it an attractive stock for investors seeking exposure to the defense industry.
09. Woodward, Inc. (NASDAQ:WWD)
Number of Hedge Fund Holders: 41
Woodward, Inc. (NASDAQ:WWD) is a prominent player in the defense sector, providing essential control system solutions for the aerospace and industrial markets. The company’s Aerospace segment is particularly relevant to defense, as it designs and manufactures systems that manage fuel, air, and combustion in aircraft, including those used by defense contractors and military agencies. Woodward, Inc. (NASDAQ:WWD) expertise in delivering precise energy and motion control solutions positions it as a critical supplier for defense-related projects, making it a strong candidate for inclusion in a list of top defense stocks to buy now.
In its Q3 2024 earnings report, Woodward, Inc. (NASDAQ:WWD) demonstrated strong financial performance, beating earnings expectations with an EPS of $1.63, surpassing the estimated $1.47. This growth highlights the company’s ability to capitalize on its diversified portfolio and operational excellence. The Aerospace segment, which generated $518 million in sales for the quarter, saw an 8% year-over-year increase. Strong aftermarket demand, driven by the high utilization of legacy aircraft and engines, contributed to a 19% rise in commercial aftermarket sales, while the defense aftermarket saw a 22% increase, underscoring Woodward’s role in supporting defense operations.
Woodward, Inc. (NASDAQ:WWD) operational success extends to its industrial segment as well, where sales reached $330 million, up 3% from the previous year. The company’s focus on power generation, driven by rising global energy demands, resulted in an 8% increase in this segment. Despite challenges in the China on-highway natural gas truck market, the company’s industrial margins remained robust, thanks to price realization and a strategic focus on innovation.
Additionally, Woodward, Inc. (NASDAQ:WWD) free cash flow for the first nine months of 2024 was an impressive $225 million, driven by increased earnings and improved working capital. The company’s commitment to returning value to shareholders is evident in its $348 million in share repurchases and dividends over the same period. With a diversified product portfolio, strong financial fundamentals, and a strategic focus on innovation, Woodward, Inc. (NASDAQ:WWD) is well-positioned to remain a key player in both the defense and industrial sectors.
08. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 42
The Boeing Company (NYSE:BA) stands out as a top defense stock due to its involvement in the aerospace and defense sectors, where it delivers innovative solutions across military and security domains. The company’s Defense, Space, and Security (BDS) segment plays a critical role in national security, producing manned and unmanned aircraft, missile systems, and advanced surveillance technologies. The Boeing Company (NYSE:BA) defense portfolio is positioned to benefit from heightened global defense spending, making it a key pick in the defense industry.
In Q2 2024, The Boeing Company (NYSE:BA) reported financial results that, while missing earnings expectations, still demonstrated fundamental strength in its long-term defense outlook. The company reported revenue of $16.9 billion, with its defense division contributing $6 billion, marking a 2% decline due to fixed-price development losses. The operating margin in the defense sector was down to -15.2%, primarily driven by cost overruns in key programs like the KC-46A Tanker and T-7A training aircraft. However, The Boeing Company (NYSE:BA) backlog remains strong at $59 billion in defense contracts, underscoring the consistent demand for its products and services.
Key developments in Boeing’s defense portfolio include the successful delivery of seven MH-139 helicopters to the U.S. Air Force and the first CH-47F Block 2 Chinook to the U.S. Army. Additionally, Boeing’s F-15EX fighter jet program achieved a milestone by reaching initial operating capability, further strengthening its position as a long-term defense contractor.
Despite short-term financial challenges, The Boeing Company (NYSE:BA) strong backlog, high demand for military aircraft, and improving execution in its fixed-price contracts suggest a favorable long-term outlook. As Boeing stabilizes its production and cost structure, particularly in its BDS segment, it is well-positioned to regain profitability and capitalize on defense spending trends. With growing geopolitical tensions, The Boeing Company (NYSE:BA) defense programs will continue to play a vital role in global security, making the stock an attractive investment in the defense sector.
07. Howmet Aerospace Inc. (NYSE:HWM)
Number of Hedge Fund Holders: 45
Howmet Aerospace Inc. (NYSE:HWM) stands out as a significant player in the defense sector, making it an ideal candidate for inclusion on our list of ten best defense stocks to buy now. The company provides critical engineered solutions for aerospace, defense, and transportation industries. Its wide-ranging portfolio, including engine products, fastening systems, engineered structures, and forged wheels, underpins the defense applications of fighter jets, military aircraft engines, and industrial gas turbines. The firm’s strong foothold in the defense aerospace sector, particularly its contributions to programs like the F-35 fighter jets, ensures its relevance as a defense stock.
Howmet Aerospace Inc. (NYSE:HWM) recently reported impressive Q2 2024 financial results, surpassing analysts’ expectations. The company posted earnings per share (EPS) of $0.67, outperforming estimates of $0.601, representing a remarkable 52% increase year-over-year. Revenue for the quarter reached $1.93 billion, reflecting a robust 14% year-over-year growth, with the commercial aerospace and defense segments contributing significantly to this performance. Defense aerospace revenue grew by 11%, driven by strong demand for fighter programs and engine spares.
The company’s ability to expand its market share in the aerospace engine business, particularly in defense and commercial sectors, has contributed to its outstanding performance. Howmet Aerospace Inc. (NYSE:HWM) recorded an impressive EBITDA of $483 million, reflecting a margin of 25.7%, and an operating income of $414 million, with a margin of 22%. This was bolstered by continued growth in commercial aerospace, which saw a 27% increase, and the defense sector, which delivered consistent demand.
Additionally, Howmet Aerospace Inc. (NYSE:HWM) free cash flow remained robust, amounting to $342 million, which further strengthens the company’s financial position. Its focus on reducing debt and optimizing its balance sheet is evident in the early retirement of $205 million in 2024 bonds and bond repurchases. This reduction in interest expense will enhance free cash flow yield, positioning Howmet for sustained profitability. With a healthy cash balance of $752 million and strategic capital expenditures to support future growth, Howmet Aerospace Inc. (NYSE:HWM) presents an attractive investment opportunity for those seeking exposure to defense stocks.
06. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 48
General Dynamics Corporation (NYSE:GD) is one of the world’s leading aerospace and defense companies, known for delivering cutting-edge solutions across various defense sectors. The company’s diverse portfolio includes nuclear-powered submarines, land combat systems, and advanced information technology services, making it a crucial player in the defense industry. Its strong presence in defense and national security positions it among the top defense stocks to buy now.
In the second quarter of 2024, General Dynamics Corporation (NYSE:GD) reported earnings of $3.26 per share, slightly below Wall Street expectations of $3.28, due to the delay in the delivery of a few G700 aircraft. Despite this minor miss, the company demonstrated strong financial growth, reporting revenues of $11.98 billion, up 18% year-over-year. All four business segments—Aerospace, Marine Systems, Combat Systems, and Technologies—contributed to this impressive performance, with the Aerospace segment alone experiencing a 51% revenue surge. Additionally, the company’s operating earnings increased by 20.2%, reaching $1.16 billion, signaling efficient cost management and favorable operational leverage.
The defense side of the business also saw robust growth. Combat Systems reported a 19% increase in revenue and a 25% rise in earnings, driven by growing demand for ammunition and vehicles like the Abrams main battle tank. Marine Systems, another key segment, posted a 13% revenue increase, primarily due to Columbia-class submarine construction and continued demand from the U.S. Navy. These segments collectively underscore General Dynamics Corporation (NYSE:GD) dominance in the defense sector, backed by its solid backlog of $91.3 billion and an expanding order pipeline. As the defense sector continues to experience heightened demand, General Dynamics Corporation (NYSE:GD) balanced portfolio, strong financial fundamentals, and steady revenue growth make it a compelling investment option. Its ability to deliver across its defense segments ensures that the company is well-positioned to capitalize on ongoing defense and aerospace contracts.
05. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 49
Northrop Grumman Corporation (NYSE:NOC) is a key player in the defense sector, known for its advanced aircraft systems and crucial contributions to national security. Its inclusion as a top defense stock is justified by its strong focus on technology-driven solutions for the U.S. military and international defense markets. The company operates through four major segments: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems, all of which provide essential capabilities for global defense.
In the second quarter of 2024, Northrop Grumman Corporation (NYSE:NOC) beat expectations, reporting earnings per share (EPS) of $6.36 compared to the forecast of $5.93. This strong performance is attributed to several factors, including a 7% increase in sales, a 13% growth in operating income, and an impressive 19% year-over-year increase in EPS. The company’s solid cash flow generation, with free cash flow increasing by over $500 million compared to the previous year, highlights its robust financial position.
The Aeronautics Systems segment saw a 14% increase in sales, driven by key programs like the B-21 and F-35, while Defense Systems experienced 7% growth due to higher demand for military ammunition and weapons systems. Northrop Grumman Corporation (NYSE:NOC) alignment with U.S. defense priorities, including its work on strategic deterrent programs like Sentinel and B-21, ensures continued revenue growth. The company is also expanding its international reach, winning contracts for missile defense and ammunition production.
Northrop Grumman Corporation (NYSE:NOC) backlog of $83 billion and a book-to-bill ratio of 1.5 reflect strong demand for its products and services. The company’s disciplined cost management and focus on operational efficiency have helped maintain strong margins, with a second-quarter operating margin of 13.5% in Defense Systems. This, along with continued growth in international sales and expanding missile defense capabilities, positions Northrop Grumman Corporation (NYSE:NOC) as a top defense stock with solid long-term potential for investors.
04. HEICO Corporation (NYSE:HEI)
Number of Hedge Fund Holders: 53
HEICO Corporation (NYSE:HEI), a major player in the defense and aerospace industries, stands out as a top defense stock to consider. The company’s impressive performance in recent quarters highlights its strength and resilience, making it a compelling investment for those looking to capitalize on the defense sector’s growth. In the third quarter of fiscal 2024, HEICO Corporation (NYSE:HEI) delivered record results, showcasing its robust position in both the commercial aviation and defense markets. Consolidated net income surged 34% to $136.6 million, or $0.97 per diluted share, up from $102 million, or $0.74 per diluted share, in the same period last year. This significant increase underscores HEICO Corporation (NYSE:HEI) effective management and operational excellence. The Flight Support Group, a key component of HEICO Corporation (NYSE:HEI), achieved all-time highs in net sales and operating income, with net sales up 68% and operating income rising 72% year-over-year. This performance was driven by a 15% organic growth in demand for commercial aerospace products and services, coupled with the positive impact of recent acquisitions.
Financial metrics further bolster HEICO Corporation (NYSE:HEI) investment appeal. The company’s consolidated EBITDA climbed 45% to $261.4 million, up from $179.8 million a year ago. This growth was accompanied by a reduction in the net debt-to-EBITDA ratio to 2.11x, down from 3.04x previously. Such a strong balance sheet and improved leverage position HEICO well for future growth and financial stability. Additionally, operating cash flow increased by 47% to $214 million, reflecting the company’s robust cash generation capabilities.
HEICO’s acquisition strategy has also been fruitful, with recent deals enhancing its product offerings and market reach. Notable acquisitions include the purchase of assets from Honeywell International to support key cockpit display products and the acquisition of Capewell Aerial Systems’ aerial delivery and descent divisions. These strategic moves not only diversify HEICO Corporation (NYSE:HEI) portfolio but also position it for continued growth in the defense sector.
The Electronic Technologies Group, while experiencing slight declines in certain product categories, has seen strong demand in defense, space, and aerospace sectors. The group’s operating margin improved to 23.5%, indicating effective cost management and operational efficiency. Overall, HEICO’s impressive financial performance, strategic acquisitions, and strong market position make it a standout choice for investors seeking exposure to the defense sector. With continued growth in defense spending and HEICO Corporation (NYSE:HEI) proven ability to capitalize on market opportunities, the company represents a solid investment in the defense space.
03. RTX Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 54
RTX Corporation (NYSE:RTX) stands out as a leading defense stock due to its diverse and robust portfolio in aerospace and defense systems, which serves a broad range of commercial, military, and government clients. The company operates through four main segments: Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence and Space (RIS), and Raytheon Missiles and Defense (RMD). Each segment brings critical capabilities to the defense sector, from avionics and aircraft engines to advanced radar systems and missile defense solutions. This makes Raytheon a compelling choice for investors seeking exposure to the defense industry.
In the second quarter of 2024, RTX Corporation (NYSE:RTX) reported impressive financial results that underscore its strong market position and operational efficiency. The company achieved adjusted sales of $19.8 billion, reflecting a 10% organic growth. This growth was driven by significant contributions from all three major business segments and is indicative of robust demand across its product lines. The adjusted EPS of $1.41 surpassed analysts’ expectations of $1.30, marking a 9% increase year-over-year, driven by profit growth and improved margins.
RTX Corporation (NYSE:RTX) financial metrics highlight its operational strength. The company generated $2.2 billion in free cash flow, reinforcing its solid financial health and ability to return value to shareholders. The backlog continued to grow, reaching $206 billion with a book-to-bill ratio of 1.25, signaling strong future revenue visibility. Noteworthy contract wins include a multibillion-dollar award for the U.S. Air Force’s next-generation airborne operations center and a significant contract for SPY-6 radar production for the U.S. Navy, further emphasizing Raytheon’s pivotal role in defense technology.
The company has also demonstrated strategic foresight with substantial investments in innovation and capacity expansion. Raytheon is advancing in areas such as hybrid electric propulsion, next-generation sensing, and hypersonics, with a commitment of over $7.5 billion to research and development this year. This focus on future technologies not only supports ongoing growth but also positions Raytheon to capitalize on evolving defense needs. Overall, RTX Corporation (NYSE:RTX) offers a compelling investment case within the defense sector. Its strong financial performance, substantial backlog, and strategic investments in cutting-edge technologies reflect a well-positioned company poised for continued growth and value creation in the defense industry.
02. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 56
Lockheed Martin Corporation (NYSE:LMT) is a top defense stock, making it a must-include in any defense-focused portfolio. As a global leader in security and aerospace, the company is renowned for its advanced military aircraft, missile defense systems, and space technologies. With its Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS), and Space segments, Lockheed Martin Corporation (NYSE:LMT) plays a crucial role in national security and military advancements, positioning it as a key player in the defense sector.
Lockheed Martin Corporation (NYSE:LMT) financial performance in the second quarter of 2024 further highlights its solid fundamentals. The company exceeded earnings expectations, reporting an EPS of $7.11, significantly higher than the anticipated $6.46. This strong result was driven by robust sales growth across all four business segments, which rose by 9% year-over-year to over $18 billion. This increase was bolstered by improvements in the supply chain and operational execution. The company also reported an impressive segment operating margin of 11.3%, a 20 basis point improvement compared to the same period last year.
One of the standout features of Lockheed Martin Corporation (NYSE:LMT) performance is its significant backlog of nearly $160 billion, which is more than twice its annual revenue. This backlog demonstrates strong demand for its defense technologies and ensures steady revenue streams for the future. The company generated over $1.5 billion in free cash flow during the quarter, reflecting both year-over-year and sequential growth, enabling it to invest in innovation while returning over 100% of free cash flow to shareholders through dividends and share buybacks.
Lockheed Martin Corporation (NYSE:LMT) F-35 program continues to be a major contributor to its success. The company began deliveries of the Technology Refresh 3 (TR-3) configured F-35 aircraft, enhancing the fighter jet’s capabilities. This program, along with key contracts like the $4 billion multiyear PAC-3 missile defense system order, secures Lockheed Martin Corporation (NYSE:LMT) position as a defense powerhouse with strong growth potential.
01. GE Aerospace (NYSE:GE)
Number of Hedge Fund Holders: 86
GE Aerospace (NYSE:GE) is a prominent defense stock due to its role in the aerospace sector, specifically through the development and production of military aircraft engines. The company’s Aviation segment, a core component of its operations, provides critical propulsion technology to defense contractors and militaries globally, making GE Aerospace (NYSE:GE) a key player in the defense industry. Furthermore, GE Aerospace (NYSE:GE) Aerospace division, which has recently become an independent company, delivers innovative propulsion systems for both commercial and military aircraft, further solidifying its position in the defense market.
GE Aerospace (NYSE:GE) Q2 2024 earnings report exceeded expectations, with the company posting an adjusted earnings per share (EPS) of $1.20, surpassing analyst estimates of $0.986. This strong performance was driven by significant growth in both revenue and profitability, particularly in GE Aerospace’s defense-related segments. The company achieved double-digit growth in operating profit and free cash flow, with its Aviation segment experiencing robust demand in both commercial and defense engines. Defense-related services and propulsion technology saw a 70% year-over-year profit increase, supported by improved pricing and a favorable product mix.
GE Aerospace (NYSE:GE) recurring revenue model is bolstered by its aftermarket services, which account for 70% of the company’s aerospace revenue. This resilient revenue stream supports the company’s long-term financial health, particularly in the defense sector. GE Aerospace (NYSE:GE) strong positioning in the military market is exemplified by its extensive installed base of 70,000 engines, including those used in combat aircraft. In Q2, GE’s defense-related orders grew, underpinned by increased demand for its advanced propulsion technologies. The T901 engine, part of the U.S. Army’s Improved Turbine Engine Program, remains a critical project for GE Aerospace (NYSE:GE), ensuring a competitive edge in defense propulsion.
Financially, GE Aerospace (NYSE:GE) operating profit surged by 37% year-over-year, with margins expanding by 560 basis points. Free cash flow reached $1.1 billion, up nearly 20%, further showcasing the company’s operational efficiency despite supply chain challenges. This solid financial performance, combined with its critical role in defense propulsion, makes GE a compelling stock for investors seeking exposure to the defense sector.
While we acknowledge the potential of GE to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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