This article looks at 10 defense stocks with the highest EPS growth in 5 years. We also discuss the global stock rally this year in the sector and how American contractors have largely failed to capitalize on the momentum.
The world has been embroiled in deadly political and armed conflict over the last few years. Russia’s war on Ukraine has gone beyond three years, while the Middle East is up in flames after Israel launched a full-scale invasion of Gaza against Hamas. According to a report, the number of conflict zones worldwide has increased by nearly two-thirds since 2021.
READ ALSO: 10 Best Performing Defense Stocks So Far in 2025 and 10 Worst Performing Defense Stocks So Far in 2025.
While the human impact of these wars has been tragic, the defense industry has profited by luring investors into buying up stocks. Several of the world’s top contractors saw their shares book all-time highs last year.
A recent report by the International Institute for Strategic Studies (IISS) stated that global defense spending soared to a record high of $2.46 trillion in 2024, amid significant budget increases in Asia, Europe, the Middle East, and North Africa due to deteriorating security environments and threat perceptions. Easing inflation in different parts of the world also allowed countries to invest in and bolster national defense.
Global defense stocks have surged this year as European capitals unlock billions to supercharge their militaries. Several contractors in the region are registering double-digit returns. Asian defense manufacturers, especially in South Korea and India, have also benefited from the splurge.
In contrast, American defense stocks have been subdued this year and missed the global rally due to concerns around government budget cuts and reduced military spending in the future if things settle down with Russia and China. The creation of DOGE has also reshaped investors’ views of the industry.
Despite a shaky start to 2025, most analysts remain optimistic about the sector, with the downside shrinking. They believe that while the world may be heading toward a multi-polar order, it is no less dangerous to decrease the need for deterrence tools.
Investor sentiment has received a boost from two recent events. In March, President Trump unveiled a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. Given the strategic competition with China, he has also announced to resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security.
With that said, let’s now shift focus on the defense stocks with the highest EPS growth in 5 years.
A military jetfighter against a deep blue sky with the sun behind it.
Methodology
For this article, we went through screeners to identify stocks in the aerospace and defense industry that have had positive EPS growth over the last five years. From there, we picked the top 10 defense stocks with the highest EPS growth during this period. Pure-play aerospace companies that do not deal in defense contracts are not part of the list. All data is as of the close of business on Thursday, April 3, 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 Defense Stocks with the Highest EPS Growth in 5 Years
10. L3Harris Technologies, Inc. (NYSE:LHX)
EPS Growth, Past 5 Years: 16.47%
L3Harris Technologies, Inc. (NYSE:LHX) is known for its wireless and night vision equipment, command and control systems, avionics, and terrestrial and spaceborne antennas. The company was formed in 2019 after Harris Corporation and L3 Technologies merged.
On April 3, L3Harris Technologies, Inc. (NYSE:LHX) announced the delivery of the first missionized OA-1K Skyraider II aircraft to the Air Force to support special operations. The Special Operations Forces (SOF) will use the aircraft to provide close air support, armed intelligence, surveillance, and precision strike capabilities.
Recent contract awards have also enhanced the stock’s appeal among investors. On March 31, L3Harris Technologies, Inc. (NYSE:LHX) signed a long-term agreement, valued up to 1 billion euros, with the Dutch Ministry of Defense for Falcon IV radios for the FOXTROT program.
In January this year, L3Harris Technologies, Inc. (NYSE:LHX) clinched a $263 million deal from the US Army for additional production of Enhanced Night Vision Goggle–Binocular (ENVG-B) systems, which will boost the capabilities of American troops to identify and engage enemy targets in low-light conditions.
The company’s financial performance remains robust. During its Q4 2024 earnings call, L3Harris Technologies, Inc. (NYSE:LHX) reported non-GAAP diluted earnings per share of $3.47, beating expectations. This was driven by robust demand across the business, coupled with operational efficiencies. FY24 revenue stood at $21.3 billion, up 10% from last year.
Wall Street analysts are bullish on L3Harris Technologies, Inc. (NYSE:LHX) with a consensus Buy rating and an average share price upside potential of 27%. It is one of the best defense stocks to buy.
9. Northrop Grumman Corporation (NYSE:NOC)
EPS Growth, Past 5 Years: 16.47%
Northrop Grumman Corporation (NYSE:NOC) is one of the largest defense contractors in the world. It is manufacturing the B-21 Raider for the US Air Force (USAF).
On April 3, the company was selected by the Royal Australian Air Force to equip its C-130J fleet with the AN/ALQ-251 advanced radio frequency countermeasures system. The system will offer aircrews radar warnings, situational awareness, precision direction, and robust protection against advanced weapon systems.
Earlier in the week, Northrop Grumman Corporation (NYSE:NOC) was also awarded two national security contracts by the United States Space Force (USSF) for in-space refueling. Last month, the company clinched a follow-on contract from the USAF to connect airborne platforms with faster and secure communications.
On March 27, RBC Capital upgraded the stock’s rating from Sector Perform to Outperform and also raised its price target from $500 to $575 per share. Wall Street analysts are bullish on Northrop Grumman Corporation (NYSE:NOC), with a consensus Buy rating and an average share price upside potential of 12%.
Northrop Grumman Corporation (NYSE:NOC)’s financial performance remains robust. Sales climbed 4% in the fiscal year 2024 to reach $41 billion, driven by continued demand for weapons. Net awards for the year totaled $50.6 billion, enabling the company to end the year with a record backlog of $91.5 billion.
According to Insider Monkey’s database for Q4 2024, 54 hedge funds held a stake in the company, up from 48 at the end of the third quarter. Northrop Grumman Corporation (NYSE:NOC) is one of the best defense stocks to buy, with a 16.47% EPS growth over the last five years.
