This article looks at the 10 best mid cap defense stocks to buy according to analysts. We also discuss the rebound in shares after a shaky beginning to the year.
Defense stocks have surged over the past week after President Trump unveiled plans for a $1 trillion defense budget for fiscal 2026, representing a 12% increase from the current year. Here is what he told reporters on April 7:
“Nobody’s seen anything like it. We have to build our military and we’re very cost-conscious, but the military is something that we have to build. And we have to be strong because you’ve got a lot of bad forces out there now. So we’re going to be approving a budget and I’m proud to say actually, the biggest one we’ve ever done for the military.”
READ ALSO: 10 Best Performing Defense Stocks So Far in 2025 and 10 Best Large Cap Defense Stocks to Buy Now.
This is an encouraging development for America’s defense sector, which had a subdued start to the year due to uncertainty around budget cuts. The creation of DOGE had also reshaped investors’ views of the industry.
Stocks got another boost last week after market chatter that tariff negotiations to address trade imbalances could include commitments from foreign countries to buy weapons from the US. On April 7, Vietnam’s prime minister issued a statement, asking for a 45-day delay in the imposition of tariffs and stating his country would buy more American goods, including arms, to tackle the trade gap.
Defense stocks have soared in Europe this year, as regional capitals unlocked billions to supercharge their militaries. While a steep selloff in response to the tariffs sparked a major plunge in shares last week, this has been a year to remember for several European defense companies that have seen double-digit returns so far in 2025.
Analysts at Citi believe defense stocks are poised for outperformance due to minimal tariff exposure, increased military budgets, and rising geopolitical tensions. Jason Gursky stated the following in a detailed preview to clients on April 10:
“We materially change the rank order of our stock picks, moving our defense coverage to the top of the list given our positive view on the outlook for global defense spending.”
Investors are also buoyed by the unveiling of a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. President Trump has also announced that he will resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security, given the strategic competition with China.
With that said, let’s now head over to the list of the best mid cap stocks from the defense sector.
A launch pad atop a grassy hill, smoke filled sky from a successful voyage to space.
Methodology
For this article, we sifted through screeners to identify mid-cap stocks in the aerospace and defense industry. These stocks have a market cap between $2 billion and $10 billion. From there, we picked the top 10 defense stocks with the highest positive share price upside potential. All data is as of the close of business on Friday, April 11, 2025.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Mid Cap Defense Stocks to Buy According to Analysts
10. Huntington Ingalls Industries, Inc. (NYSE:HII)
Market Cap: $8.47 billion
Share Price Upside Potential: 7.12%
Huntington Ingalls Industries, Inc. (NYSE:HII) is an American all-domain defense provider, with expertise in shipbuilding, unmanned systems, cyber, ISR, and synthetic training. It is the country’s sole builder of aircraft carriers and a major contractor for most nuclear submarines. With a share price upside potential of 7.12%, it is one of the best mid cap stocks to buy.
The stock surged 17% during the week of April 7 in response to President Trump signing an executive order to revive American shipbuilding, aimed at reducing China’s grip on the industry. On Friday, Goldman Sachs upgraded Huntington Ingalls Industries, Inc. (NYSE:HII) from Sell to Buy, and also raised its price target for the stock to $234 from $145.
Another positive during the week was Huntington Ingalls Industries, Inc. (NYSE:HII)’s delivery of the initial two Lionfish small uncrewed undersea vehicles to the Navy under a multi-year program, which could scale to 200 vehicles, with a contract value of $347 million. Late last month, the company also launched the USS Jeremiah Denton (DDG 129), the third Flight III Arleigh Burke-class destroyer for the US Navy.
Huntington Ingalls Industries, Inc. (NYSE:HII) recently signed a memorandum of understanding with HD Hyundai Heavy Industries to collaborate on accelerating ship production for defense and commercial projects. The strategic agreement reflects HII’s commitment to expand shipbuilding capacity in support of national security.
9. Embraer S.A. (NYSE:ERJ)
Market Cap: $7.69 billion
Share Price Upside Potential: 7.72%
Embraer S.A. (NYSE:ERJ) is a Brazilian jet manufacturer that produces aircraft for commercial, executive, and defense purposes.
The company’s shares have slumped 19% over the past month, with a major dip after Wolfe Research downgraded the stock to Peer Perform from Outperform on March 24, citing tariff risks. Despite the recent fall, Embraer S.A. (NYSE:ERJ) is one of the best mid cap stocks so far in 2025, with year-to-date gains of 13.5%, on the back of robust financial results for fiscal 2024 and several recent high-value contract awards.
In February, the company received a $7 billion order from Flexjet for 182 aircraft and 30 options. This is the largest firm order for both companies and will double the size of Flexjet’s fleet over the next five years. During the month, Japan’s ANA Holdings also ordered 15 E190-E2 planes to support its domestic operations. The deliveries are expected to commence in 2028.
On April 3, Embraer S.A. (NYSE:ERJ) signed an MoU with the South African aerospace and defense company, Denel, for potential future collaboration on the KC-390 Millennium, focused on aerostructure manufacture, repair, maintenance, and overhaul activities. This is a significant strategic partnership as the country looks to replace its legacy military aircraft.
According to a report on Reuters, the company is considering establishing an assembly line for its KC-390 military cargo aircraft in Poland due to a surge in plane sales in Europe. Moreover, the Portuguese Air Force recently joined Embraer S.A. (NYSE:ERJ) and the Brazilian Air Force in collaborative studies to provide the KC-390 Millennium with ISR capabilities.
8. Woodward, Inc. (NASDAQ:WWD)
Market Cap: $9.95 billion
Share Price Upside Potential: 15.28%
Woodward, Inc. (NASDAQ:WWD) is a leader in the development of satellite, launch vehicle, and missile control systems, with several defense contractors looking toward the company for control and actuation solutions.
In December last year, the company announced it had signed an agreement to acquire the Safran Electronics & Defense electromechanical actuation business in North America, including intellectual property, talent, operations assets, and long-term customer agreements for the HSTA systems for aircraft stabilization. The transaction is expected to close in mid-2025.
On February 3, Woodward, Inc. (NASDAQ:WWD) announced financial results for the first quarter of the fiscal year 2025. It reported net sales of $773 million, down 2% from last year. Adjusted earnings per share were logged at $1.35, beating expectations of $1.14 per share. The company stated the results aligned with forecasts, putting it on track to deliver full-year guidance.
Defense OEM sales increased 21% year-over-year during the quarter, while the defense aftermarket increased 8%. Woodward, Inc. (NASDAQ:WWD) is seeing robust demand for defense products amid the recent geopolitical developments. The company anticipates the momentum will continue, with strong growth expected in smart defense.
Wall Street analysts are bullish on Woodward, Inc. (NASDAQ:WWD), with a consensus Buy rating and an average share price upside potential of 15.28%, making it one of the best mid cap stocks to buy now.
7. Rocket Lab USA, Inc. (NASDAQ:RKLB)
Market Cap: $8.90 billion
Share Price Upside Potential: 20.48%
Rocket Lab USA, Inc. (NASDAQ:RKLB) is an end-to-end space company delivering reliable launch services, spacecraft components, spacecraft design services, and related software to support the space economy. It is also working on several defense contracts.
The US Space Force recently selected the company to compete for the DoD’s highest-priority missions for the National Security Space Launch (NSSL) Phase 3 Lane 1 program. This will be a five-year IDIQ contract with a ceiling of $5.6 billion. Analysts believe this is a big opportunity for Rocket Lab USA, Inc. (NASDAQ:RKLB) to position itself as an important player in national security missions.
In January this year, Rocket Lab USA, Inc. (NASDAQ:RKLB) was picked by Kratos as part of a team to deliver hypersonic test launches for the DoD. The contract has a potential value of $1.45 billion and is aimed at providing a cost-effective bridge between hypersonic ground tests and system-level flight tests.
These latest developments have bolstered investor sentiment around the stock. ClearBridge Small Cap Growth Strategy stated the following regarding Rocket Lab USA, Inc. (NASDAQ:RKLB) in its Q1 2025 investor letter:
“Rocket Lab USA is a manufacturer of spacecraft and satellite components as well as a service provider for satellite launch services, primarily focused today on smaller payloads. With an innovative founder-led management team competing in an enormous market with significant growth in commercial, government and classified applications, we see significant growth potential.”
According to Insider Monkey’s database for Q4 2024, 37 hedge funds held a stake in the company, up from 16 at the end of the third quarter. Wall Street analysts are bullish on Rocket Lab USA, Inc. (NASDAQ:RKLB), with a consensus Buy rating and an average share price potential of 20.48%. It is one of the best mid cap stocks to buy.
6. BWX Technologies, Inc. (NYSE:BWXT)
Market Cap: $9.44 billion
Share Price Upside Potential: 22.68%
BWX Technologies, Inc. (NYSE:BWXT) is an aerospace and defense company that provides nuclear solutions for global security, environmental protection, clean energy, and space exploration. It is one of the best mid cap stocks to buy right now.
On April 15, the company announced the acquisition of 97 acres of land Horizon Center Industrial Park in Oak Ridge, Tennessee. The move signals BWX Technologies, Inc. (NYSE:BWXT)’s long-term commitment to rebuild domestic uranium enrichment capability and support future defense missions.
This adds to the momentum from earlier in the month, when BWX Technologies, Inc. (NYSE:BWXT) was awarded a contract by the Department of Energy to operate and manage the Strategic Petroleum Reserve for an estimated value of $2.6 billion over 10 years.
In February, BWX Technologies, Inc. (NYSE:BWXT) clinched contracts worth $2.1 billion to manufacture reactor components under the US Naval Nuclear Propulsion Program to support the construction activities of the Ford-class aircraft carriers and the Columbia and Virginia class submarines.
Wall Street analysts are bullish on BWX Technologies, Inc. (NYSE:BWXT) with a consensus Strong Buy rating and an average share price upside potential of 22.68%. On April 1, Seaport Global initiated coverage of the stock with a Buy rating and a price target of $145 per share, citing the company’s unique position in supplying nuclear reactors and fuel for military needs.
5. Karman Holdings Inc. (NYSE:KRMN)
Market Cap: $4.10 billion
Share Price Upside Potential: 27.30%
Karman Holdings Inc. (NYSE:KRMN) specializes in the manufacturing and sale of mission-critical systems for missile, space, and defense programs. The stock has returned over 13% since its debut on the NYSE on February 13.
Analysts credit the stock’s performance to growing appetite for defense and space firms under the Trump administration, with expectations that the US president would push ahead with a race to the Moon and Mars, given his friendship with Elon Musk. Trump’s ambition to build an ‘American Iron Dome’ also presents an opportunity for Karman Holdings Inc. (NYSE:KRMN) to benefit, given its expertise in areas like hypersonic missile defense.
On April 4, Karman Holdings Inc. (NYSE:KRMN) announced the acquisition of Metal Technology Inc., a firm with expertise in manufacturing specialized refractory metal alloy systems. These play a critical role in optimising the performance of missile programs in ultra-high temperature environments. The strategic move will open the doors to new, classified missile defense programs for the company that align with the DoD’s funding priorities.
Last week, Karman Holdings Inc. (NYSE:KRMN) declared financial results for fiscal 2024. It reported a record revenue of $345.3 million, up 23% year-over-year. Net income was posted at $12.7 million, surging 191.3% from last year. The company ended the year with a record funded backlog of $579.8 million, growing 35.2% compared to the prior fiscal year.
Wall Street analysts are bullish on Karman Holdings Inc. (NYSE:KRMN), with a consensus Strong Buy rating and an average share price upside potential of 27.30%. It is one of the best mid cap stocks to buy right now.
4. Hexcel Corporation (NYSE:HXL)
Market Cap: $4.17 billion
Share Price Upside Potential: 34.41%
Hexcel Corporation (NYSE:HXL) is a leader in advanced lightweight composites technology. It develops and markets carbon fiber, honeycomb structures, structural reinforcements, resins, and composite materials and parts for commercial aerospace, defense, space, and industrial applications.
On April 15, Wells Fargo downgraded the stock to Equal Weight and lowered its price target to $55 per share from $63, citing the risk of a slowdown affecting aircraft production and sales. The firm noted Hexcel Corporation (NYSE:HXL)’s high operating leverage, which makes it vulnerable in the case of a slowdown.
Despite the adjustment, Hexcel Corporation (NYSE:HXL)’s share price upside potential stands at over 34%, making it one of the best mid cap stocks to invest in. Recent reports highlight a dramatic increase in insiders growing their holdings in the company over the past 12 months, reflecting their confidence in HXL’s trajectory.
In March, Hexcel Corporation (NYSE:HXL) announced a strategic partnership with FIDAMC, a leading research and technology centre, to drive innovation, research, and development of advanced composite materials. The collaboration between these two organizations is expected to speed up the transition from research to real-life application across multiple industries.
According to Insider Monkey’s database for Q4 2024, 30 hedge funds held a stake in Hexcel Corporation (NYSE:HXL). D E Shaw was the largest investor in the company, with holdings of over $83 million as of December 31, 2024.
3. Moog Inc. (NYSE:MOG-A)
Market Cap: $5.15 billion
Share Price Upside Potential: 35.99%
Moog Inc. (NYSE:MOG-A) designs, manufactures, and integrates precision control components and systems for OEMs and end users in the aerospace, industrial, and defense markets. The company operates through four segments: Space and Defense, Military Aircraft, Commercial Aircraft, and Industrial.
On January 29, the company announced its selection by Lockheed Martin to provide custom actuators for the PAC-3 MSE contract with the Army. This is one of the largest and most significant awards in Moog Inc. (NYSE:MOG-A)’s defense division, valued at over $100 million. The program is aimed at defending the country from inbound ballistic and cruise missiles, aircraft, and other advanced threats.
Moog Inc. (NYSE:MOG-A) reported impressive results for the first quarter of fiscal 2025, with net sales of $910 million, up from $857 million during the prior year’s quarter. The increase was driven by growth in the defense and aerospace businesses. Adjusted diluted net earnings per share were logged at $1.78, growing 16% year-over-year. The company’s 12-month backlog stood at $2.5 billion.
According to Insider Monkey’s database for Q4 2024, 25 hedge funds held a stake in the company, up from 17 at the end of the third quarter. Wall Street analysts are bullish on Moog Inc. (NYSE:MOG-A), with a consensus Strong Buy rating and an average share price upside potential of nearly 36%. It is one of the best mid cap stocks to buy.
2. AeroVironment, Inc. (NASDAQ:AVAV)
Market Cap: $4.13 billion
Share Price Upside Potential: 38.32%
AeroVironment, Inc. (NASDAQ:AVAV) is engaged in the development and delivery of a portfolio of robotics systems and other related services for governments and businesses internationally. The company’s offerings include unmanned aerial vehicles, ground robot systems, and loitering munition systems, among others. The stock has surged by 15.67% over the past week on the back of several positive recent developments.
On April 1, AeroVironment, Inc. (NASDAQ:AVAV)’s stockholders approved the acquisition of BlueHalo LLC, a leading space and defense engineering company. The transaction is expected to close in May and will help the company further expand its portfolio amid ongoing geopolitical tensions in different parts of the world.
In March, AeroVironment, Inc. (NASDAQ:AVAV) received a major contract to deliver 41 advanced uncrewed ground vehicles to Germany through its wholly owned subsidiary, Telerob. The deliveries will begin during the summer of 2025 and run through 2027.
As a result, on April 8, Raymond James upgraded AeroVironment, Inc. (NASDAQ:AVAV) from Market Perform to Strong Buy, and set a price target of $200 per share for the stock. The analyst’s optimistic outlook for the company stems from its strategic initiatives like the BlueHalo acquisition, as well as its current standing with America’s defense spending expected to see a surge.
Wall Street analysts are bullish on AeroVironment, Inc. (NASDAQ:AVAV) with a consensus Buy rating and an average share price upside potential of 38.32%. Investor sentiment continues to improve as well. According to Insider Monkey’s database for Q4 2024, 24 hedge funds held a stake in the company, up from 22 at the end of the third quarter. It is one of the best mid cap stocks to buy now.
1. CAE Inc. (NYSE:CAE)
Market Cap: $7.27 billion
Share Price Upside Potential: 40.85%
CAE Inc. (NYSE:CAE) is a technology company specializing in simulation training and critical operations support solutions. It operates in two segments: Civil Aviation and Defense and Security.
On February 13, the company reported impressive results for the third quarter of fiscal 2025, with consolidated revenue growing 12% year-over-year to $1.22 billion. Adjusted segment operating income was posted at $190 million, up 31% from the prior year. Adjusted EPS was logged at $0.29, compared to $0.24 per share for Q3 2024. The company’s backlog stood at $20.3 billion, which included $2.2 billion in new orders.
The strong financial results have bolstered investor sentiment around the stock. ClearBridge Mid Cap Strategy stated the following regarding CAE Inc. (NYSE:CAE) in its Q4 2024 investor letter:
“We also benefited from our strong stock selection in the industrials sector. CAE Inc. (NYSE:CAE), which provides simulation training and critical operations support to both civil and defense aviation customers, reported solid quarterly earnings stemming from its defense business. In addition to the company’s strong market share and customer demand in civil flight simulation, its strong growth in its defense business and active approach to improving its balance sheet should be long-term growth catalyst.”
Late last month, CAE Inc. (NYSE:CAE) was awarded two notable contracts. First, it clinched an agreement to provide management, engineering, and maintenance services to support the C-130J Weapon Systems Trainer for the Royal New Zealand Air Force. Second, it won a $180 million contract to support the US Army under the Advanced Helicopter Flight Training Support (AHFTS) program.
Overall, CAE ranks first among the 10 Best Mid Cap Defense Stocks to Buy According to Analysts. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CAE but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
