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.
8. Smith & Wesson Brands, Inc. (NASDAQ:SWBI)
EPS Growth, Past 5 Years: 20.77%
Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is a leading maker of long guns, handguns, rifles, and other shooting equipment. The company sells its products to various customers, including competitive shooters, firearm enthusiasts, security agencies, individuals desiring personal protection, sportsmen, and hunters.
On March 6, Smith & Wesson Brands, Inc. (NASDAQ:SWBI) announced results for the third quarter of the fiscal year 2025. Net sales fell 15.7% year-over-year, slightly below the company’s target range. The gross margin was also 4.6% below the comparable quarter last year. Due to softer demand across the industry, the company expects annual revenue for 2025 to be 5% to 10% lower than in the fiscal year 2024.
Despite a challenging environment, Smith & Wesson Brands, Inc. (NASDAQ:SWBI) has been encouraged by the performance of new products, which represented 41% of sales in the recent quarter. The company is focused on innovation and plans to launch several new products during the final quarter of the fiscal year, which are expected to drive strong momentum moving forward.
Wall Street analysts are bullish on the stock, with a consensus Buy rating. According to Insider Monkey’s database for Q4 2024, 15 hedge funds held a stake in the company, unchanged from the third quarter. Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is one of the best defense stocks to buy, with its EPS growing by nearly 21% over the past five years.
7. Howmet Aerospace Inc. (NYSE:HWM)
EPS Growth, Past 5 Years: 22.24%
Howmet Aerospace Inc. (NYSE:HWM) manufactures components for aircraft engines, fasteners, aluminum wheels for trucks, and titanium structures for aerospace and defense applications.
It is one of the best defense stocks to buy, with an EPS growth of over 22% in the last five years. Howmet Aerospace Inc. (NYSE:HWM)’s impressive financial performance continues to make it an appealing stock for investors. On February 13, the company reported a 9.1% year-over-year increase in Q4 revenue to $1.9 billion. Net income grew 33% from last year to $314 million, driven by robust growth in the commercial aerospace business.
Howmet Aerospace Inc. (NYSE:HWM)’s full-year 2024 revenue stood at $7.4 billion, up 12% from last year. Net income surged 57% to $1.2 billion. The operating income margin stood at 22%. GAAP EPS for the year was recorded at $2.81, compared to $1.83 per share in the prior year.
Hardman Johnston Global Equity Strategy stated the following regarding Howmet Aerospace Inc. (NYSE:HWM) in its Q4 2024 investor letter:
“From a sector standpoint, the main drivers of the portfolio’s outperformance during the fourth quarter were Industrials and Materials. Within Industrials, Howmet Aerospace Inc. (NYSE:HWM) and Vertiv Holdings Co. were the largest contributors to outperformance. Howmet reported an earnings beat during the quarter with broad-based strength spanning across all key segments. In particular, the company’s Engine Products and Fasteners segment performed well. During the earnings call, management spent significant time describing the emerging new growth driver of industrial gas turbines, which are used in gas power plants, which have become a focus for investors due to accelerating demand from AI data centers. Howmet is the leading supplier to the three major producers of these engines and will benefit from both initial purposes and the long-term maintenance demand.”
Wall Street analysts are bullish on Howmet Aerospace Inc. (NYSE:HWM), with a consensus Buy rating and an average share price upside potential of 10%. According to Insider Monkey’s database, 58 hedge funds held a stake in the company at the end of Q4 2024, improving from 45 at the end of the third quarter.
6. Innovative Solutions and Support, Inc. (NASDAQ:ISSC)
EPS Growth, Past 5 Years: 29.67%
Innovative Solutions and Support, Inc. (NASDAQ:ISSC) manufactures and sells advanced avionic solutions to a broad customer base, spanning commercial, military, and business and aviation markets.
Last month, the company unveiled the next-generation Prodigy 3ATI Integrated Standby Unit (ISU) to enhance flight safety, efficiency, and reliability. The unit has set a new standard in aviation instrumentation by consolidating important flight data into a compact display system. The Prodigy 3ATI ISU is available for use on commercial, military, and business aviation applications.
Innovative Solutions and Support, Inc. (NASDAQ:ISSC)’s shares have fallen 33% year-to-date, with a major slump following the earnings call for the first quarter of fiscal year 2025 on January 29. The company reported net revenues of $16 million, representing a 70% year-over-year growth, driven by momentum from new military programs.
However, gross margins dropped from 59.3% last year to 41.4% due to incremental depreciation from recent product line acquisitions. Net income for the first quarter was recorded at $0.7 million or $0.04 a share, missing estimates and down from $1.1 million, or $0.06 per share a year ago.
Despite the crash, experts argue that Innovative Solutions and Support, Inc. (NASDAQ:ISSC) offers a strong risk-reward profile, and the share price could return to the $11-12 range when the market reassesses the company’s earnings power. It has spent a long time shifting toward OEM sales, stabilizing the business. Moreover, the acquisition of Honeywell’s military product is improving revenue predictability.
5. Triumph Group, Inc. (NYSE:TGI)
EPS Growth, Past 5 Years: 40.48%
Triumph Group, Inc. (NYSE:TGI) designs, engineers, manufactures, repairs, and overhauls complex aerospace structures and systems for both the commercial and military markets.
In February, the company announced it had signed a definitive agreement to be acquired by Berkshire Partners and Warburg Pincus affiliates for $3 billion. Under the terms of the agreement, TGI will become a privately held company after the completion of the acquisition, and its shareholders will receive $26 per share in cash, representing a 123% premium over TGI’s closing stock price for the 90 days before January 31.
Triumph Group, Inc. (NYSE:TGI) recently expanded its role in the M777 Howitzer program by extending its agreement with BAE Systems and the US Army as a strategic supplier of critical components. It has shipped 2,365 units since 2022 and has 938 units on order. The partnership is expected to open more doors for future military projects, positioning the company well for long-term growth.
Triumph Group, Inc. (NYSE:TGI) is one of the best defense stocks to buy, with year-to-date returns of 34%. Last week, the stock soared to a 52-week high of $25.53 per share, marking a one-year increase of over 75%. Investor sentiment has been bolstered by strong third-quarter results for FY25, with the company reporting an 11% surge in net sales year-over-year and earnings exceeding analysts’ expectations.
4. AAR Corp. (NYSE:AIR)
EPS Growth, Past 5 Years: 44.78%
AAR Corp. (NYSE:AIR) provides products and services to commercial aviation, government, and defense customers worldwide. It is one of the best defense stocks to buy, with its EPS growing by nearly 45% over the last five years.
This month, the company completed the sale of its Landing Gear Overhaul business to GA Telesis for $51 million. The divestiture is part of AAR Corp. (NYSE:AIR)’s strategic vision to optimize its portfolio by focusing on core functions that will accelerate the company’s targeted growth and margin expansion initiatives.
On March 27, AAR Corp. (NYSE:AIR) declared financial results for the third quarter of the fiscal year 2025. It reported a revenue of $678 million, growing 20% from last year, driven by robust demand for the company’s aftermarket services. However, the figure fell short of expectations. Adjusted diluted EPS was logged at $0.99, up 16% year-over-year.
After the earnings call, Keybanc and Truist Securities lowered their price targets for AAR Corp. (NYSE:AIR), while maintaining their Overweight and Buy ratings for the stock. The overall sentiment around the company is encouraging, with analysts having a consensus Buy rating and an average share price upside potential of 61%.
According to Insider Monkey’s database for Q4 2024, 19 hedge funds held a stake in AAR Corp. (NYSE:AIR), up from 18 at the end of the third quarter.
3. TAT Technologies Ltd. (NASDAQ:TATT)
EPS Growth, Past 5 Years: 61.44%
TAT Technologies Ltd. (NASDAQ:TATT) provides services and products for the commercial and military aerospace and ground defense sectors. It is one of the best defense stocks to buy, considering the company’s substantial EPS growth over the past five years.
On March 26, the company announced financial results for the fiscal 2024. Annual revenue surged 34.1% year-over-year to $152.1 million. Gross profit stood at $33 million, up 47% from last year. Net income increased by 139% to $11.2 million or $1.0 per diluted share. However, cash flow from operations was negative $5.8 million, compared to a positive $2.3 million in the prior year.
Last week, Benchmark raised its price target for TAT Technologies Ltd. (NASDAQ:TATT) to $35 per share from $30 previously while maintaining the stock’s Buy rating. The firm cited the company’s robust financial performance, especially during the fourth quarter, as the reason behind the increase.
However, the stock has yet to find traction among investors. According to Insider Monkey’s database for Q4 2024, only three hedge funds held a stake in the company. Renaissance Technologies was the largest investor in TAT Technologies Ltd. (NASDAQ:TATT), with holdings valued at approximately $4.9 million as of December 31.
2. GE Aerospace (NYSE:GE)
EPS Growth, Past 5 Years: 94.19%
GE Aerospace (NYSE:GE) is a global aerospace propulsion, services, and systems company with an installed base of around 25,000 military and 45,000 commercial aircraft engines.
The company has been in the news recently for notable contract awards. On March 31, it clinched a subcontract to develop avionics systems for the Army’s Future Long Range Assault Aircraft (FLRAA) program, working as part of a team led by Bell Textron Inc. Earlier in the month, GE Aerospace (NYSE:GE) was selected by Korean Air to provide GEnx and GE9X engines to power its new Boeing aircraft.
In March, GE Aerospace (NYSE:GE) also received a $5 billion IDIQ contract from the US Air Force to support Foreign Military Sales (FMS) for the F110-GE-129 engines, which power F-15 and F-16 aircraft operated by American allied nations. The agreement reflects the company’s commitment to America’s defense partnerships and to ensuring the operational readiness of fleets globally.
GE Aerospace (NYSE:GE) plans on heavily investing in its facilities this year. It has announced to spend up to $1 billion in its US facilities in 2025 to strengthen manufacturing and innovation. The figure is nearly twice last year’s commitment and is set to improve engine safety, quality, and delivery. The company will also invest over €78 million in its European manufacturing sites in 2025.
GE Aerospace (NYSE:GE)’s financial performance remains strong. During Q4 2024, the company topped Wall Street’s earnings estimates. It anticipates a major profit surge in the fiscal year 2025 as well, which has further enhanced the stock’s appeal among investors. It is one of the best defense stocks to buy now.
1. Axon Enterprise, Inc. (NASDAQ:AXON)
EPS Growth, Past 5 Years: 218.25%
Axon Enterprise, Inc. (NASDAQ:AXON) manufactures weapons and technology for law enforcement agencies, the military, and civilian use. The company integrates cloud software solutions and hardware devices to help enable modern policing, defense, and security.
With a staggering 218% EPS growth over the past 5 years, Axon Enterprise, Inc. (NASDAQ:AXON) is one of the best defense stocks to buy. Investor interest has further strengthened in the company after it reported robust financial results for the fiscal year 2024 in February.
Axon Enterprise, Inc. (NASDAQ:AXON) generated a revenue of $2.1 billion, growing 33% year-over-year, and nearly double from the figure two years ago. The company also marked 12 successive quarters of 25% or above revenue growth. Annual net income stood at $377 million, supporting the non-GAAP net income of $466 million.
According to Insider Monkey’s database, 64 hedge funds held a stake in Axon Enterprise, Inc. (NASDAQ:AXON) at the end of the fourth quarter of 2024, improving from 46 in Q3. Here is what Sands Capital Select Growth Fund stated about AXON being an attractive stock in its Q4 2024 investor letter:
“Axon Enterprise, Inc. (NASDAQ:AXON) is a leading provider of public-safety technology, including body cameras, software, and the TASER electroshock device. Axon’s mission is to “protect life, capture truth, and accelerate justice.” The company is the sole manufacturer of the TASER and is the world’s leading provider of body cameras by market share. Demand for Axon’s safety solutions is both secular and countercyclical, in our view. The company benefits from the secular shift toward safer and more accountable policing, and demand is likely to be durable in recessionary periods, when crime tends to rise and governments tend to increase spending. While its hardware and software can be purchased separately, they are increasingly sold as a bundle, resulting in highly visible and recurring revenue with long-duration contracts. This bundled ecosystem works together to automate, record, and store tamperproof evidence in the cloud. The bundle also benefits from positive flywheel effects because Axon uses anonymized usage data to drive hardware, software, and training improvements, ultimately resulting in an attractive and effective service for users. Over the next decade, we expect hardware to become a smaller part of Axon’s overall business, with the higher margin software component becoming a more meaningful revenue driver.”
Overall, AXON ranks first among the 10 Defense Stocks with the Highest EPS Growth in 5 Years. 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 AXON but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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