In this article, we will look at the 11 Best Aerospace and Defense Stocks to Buy Right Now.
How Did The Aerospace And Defense Sector Perform in Q3 2024?
According to a report by Dinan Capital Advisors, the aerospace and defense industry’s EBITDA multiples increased by around 8% on average during the third quarter of 2024. Within the industry, the Maintenance, Repair, and Overhaul (MRO) segment stood out with the highest EBITDA multiple of more than 19%. The robust performance in the sector was driven by increased government spending, AI defense implementation, and increased global travel. As per the report, the global market size of the aerospace and defense sector is estimated to grow from $1 trillion to around $1.5 trillion during the next decade.
There are various factors contributing to growth within the industry. Firstly, the defense sector is experiencing significant expansion due to the ongoing conflicts in the Middle East and Ukraine. This rising defense demand resulted in a record defense order backlog of $747 billion, indicating an 11% increase year-over-year. Moreover, the Senate Armed Services Committee has projected that Congress will finalize the FY25 US defense budget at approximately $833 billion, exceeding last year’s spending limits.
In addition to increased defense spending, which is one segment of the overall aerospace and defense industry, international air traveling is also improving. According to a report by FlightGlobal, the global passenger traffic grew by 7.4% subsequently during the third quarter. Although the profitability of the global airline industry is still down by around $1.7 billion year-over-year, the subsequent growth in passengers indicates an ongoing recovery.
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Mitchell Reiss, American diplomat and distinguished fellow at the Royal United Services Institute appeared on a CNBC interview on November 7 to discuss how the defense sector will perform under President-elect Donald Trump. He said that the United States government is expected to increase its defense spending under President Donald Trump. Currently, defense spending is at its lowest level since 1998 and the geopolitical situation is more dangerous than the said year. Reiss thinks that the president will double down on some of the initiatives from his first term. Trump sees China as a United States adversary and he sees Israel and Saudi Arabia as stabilizing forces in the Middle East and will want to build upon the Abraham Accords. He also thinks that the president will call upon its European allies to increase defense spending.
While Reiss expects the United States’ defense spending to increase, he also noted that a third of the NATO countries are still not hitting the 2% mark in terms of their defense spending. Considering the geopolitical tensions between Russia and Ukraine, European countries would also naturally pivot towards increasing their defense spending. Reiss believes that if someone is interested in defense stocks there is a lot of growth potential within the industry.
With that let’s take a look at the 11 best aerospace and defense stocks to buy right now.
Pixabay / Public Domain
Our Methodology
To curate the list of the 11 best aerospace and defense stocks to buy right now, we used the Finviz stock screener. Using the screener we aggregated a list of companies working in the aerospace and defense industry and sorted them by market capitalization. Next, we sourced the number of hedge funds holding each company from Insider Monkey’s Q3 2024 database. The list is ranked in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? 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).
11 Best Aerospace and Defense Stocks to Buy Right Now
11. BWX Technologies, Inc. (NYSE:BWXT)
Number of Hedge Fund Holders: 43
BWX Technologies, Inc. (NYSE:BWXT) is a specialized defense company with expertise in the nuclear segment. The company designs and produces critical parts for naval nuclear reactors used in US submarines and aircraft carriers. This includes everything from the reactors themselves to the nuclear fuel that powers them. It operates through two main segments namely Government and Commercial application.
One of the key competitive edges of the company is that it works closely with the US Department of Energy (DOE) and the National Nuclear Security Administration (NNSA). This allows it to work on long-term multi-billion dollar contracts. Recently, on December 2nd, BWX Technologies, Inc. (NYSE:BWXT) announced that it has been awarded a significant contract worth up to $3 billion from the U.S. Department of Energy (DOE) to continue cleanup operations at the West Valley Demonstration Project in New York. This contract is significant as it ensures the continued involvement of the company in the West Valley site, where it has been active since 2011.
Moreover, BWX Technologies, Inc.’s (NYSE:BWXT) third-quarter revenue of $672 million for fiscal 2024 was largely driven by robust growth in high-margin government contracts. Management reported that the quarterly revenue grew 14% year-over-year, with government operations contributing around $560 million, indicating 17% growth during the same time.
To further boost its advanced specialty materials portfolio the company on November 4, announced signing a purchase agreement to acquire L3Harris’ Aerojet Ordnance Tennessee, Inc. (A.O.T.) business for approximately $100 million. Management is confident that the acquisition will allow the company to enhance its ability to develop and manufacture advanced materials for various sectors, including commercial, military, and space applications. It is one of the best aerospace and defense stocks to buy right now.
Heartland Value Fund stated the following regarding BWX Technologies, Inc. (NYSE:BWXT) in its first quarter 2024 investor letter:
“We believe Chart represents a better opportunity in the Industrials sector than BWX Technologies, Inc. (NYSE:BWXT), the nuclear components manufacturer we sold in the first quarter.
BWX was a profitable investment, but two catalysts drove valuations to a level we deemed fully priced. For starters, BWX’s development of small nuclear reactors gained steam, with appeal to Energy sector customers. So, too, did the company’s work on medical nuclear isotopes, critical to healthcare supply and security issues.
We sold the stock, which jumped 33.7% in the quarter, after hitting our price target. At 30X earnings, BWX’s risk-reward proposition disintegrated.”
10. Howmet Aerospace Inc. (NYSE:HWM)
Number of Hedge Fund Holders: 45
Howmet Aerospace Inc. (NYSE:HWM) is one of the best aerospace and defense stocks to buy right now. It specializes in making advanced parts and systems for the aerospace and transportation industries. The company mainly focuses on aircraft parts, including engines and gas turbines, using innovative designs and advanced manufacturing techniques.
The company posted better-than-expected results for its third quarter results of fiscal 2024. It delivered robust results amidst a challenging market environment characterized by the Boeing strike, one of its key clients, and a slowdown in the European market. Howmet Aerospace Inc. (NYSE:HWM) delivered $1.84 billion in revenue, up 11% year-over-year. While the revenue grew substantially, it fell slightly short of the analysts’ expectations of $1.85 billion. However, the company surprised analysts with its GAAP net income of $332 million which grew from only $188 million in the third quarter of 2023.
Management believes that its prospects for the next year are even better. During the earnings call it highlighted robust demand for air travel for passengers and freight, with growth rates in the Asia-Pacific region remaining strong at around 7%. Moreover, due to previous underproduction of aircraft, there is a significant backlog of orders, which suggests a healthy outlook for aircraft production and related products over the coming years. Howmet Aerospace Inc. (NYSE:HWM) is strategically positioned to benefit from the growing demand in the commercial aerospace and defense sector due to its international client base.
Fidelity Growth Strategies Fund stated the following regarding Howmet Aerospace Inc. (NYSE:HWM) in its Q3 2024 investor letter:
“Lastly, an overweight in jet engine components maker Howmet Aerospace Inc. (NYSE:HWM) (+29%) contributed as well. In July, management announced that Q2 financial results exceeded expectations, with earnings surging by 52% due to robust demand for travel and an aging global aircraft fleet, which resulted in substantial backlogs for aircraft manufacturers. Consequently, management raised 2024 earnings and revenue guidance, hiked the company’s quarterly dividend by 60%, and increased its share-buyback program.”
9. Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 46
Axon Enterprise, Inc. (NASDAQ:AXON) is a company that focuses on providing advanced technology solutions for law enforcement and public safety. The products developed by the company include hardware such as cameras and TASERs, and cloud software for managing evidence and operations. It primarily serves law enforcement agencies at all levels including private security firms.
The company delivered robust growth during its third quarter results of fiscal 2024. The revenue of $544 million increased 32% year-over-year, surpassing analyst expectations. Revenue growth was fueled by strong growth across the board. Its cloud services revenue was up 36% year-over-year, whereas the Tasers revenue grew 3.4% during the same time.
While the demand for its Tasers and body cameras remains robust, Axon Enterprise, Inc. (NASDAQ:AXON) has been leveraging artificial intelligence into its products. Starting the fourth quarter of 2024, the company announced its AI Era Plan, which includes a suite of products designed to enhance operational efficiency and investigative accuracy. Some notable features include AutoTranscribe, Draft One, Automatic License Plate Reading (ALPR), and Video Redaction.
Considering strong demand for its products and growth prospects arising from the launch of its AI features, management expects fourth-quarter revenue to be in the range of $560 million to $570 million, representing over 30% year-over-year growth at the midpoint. It is one of the best aerospace and defense stocks to buy right now.
Carillon Eagle Mid Cap Growth Fund stated the following regarding Axon Enterprise, Inc. (NASDAQ:AXON) in its Q3 2024 investor letter:
“Axon Enterprise, Inc. (NASDAQ:AXON) is a market-leading provider of next-generation law enforcement technology solutions. The company has had ongoing success with new product rollouts within both its TASER and body camera product lines, as well as its innovative software offerings, and the stock has responded accordingly. The company remains intensely focused on the development of new law enforcement solutions, and we believe recent developments in interesting areas such as drones, as well as in artificial intelligence-enabled solutions for evidence- and administrative-related uses, could provide an additional tailwind to the company’s robust growth.”
8. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 48
General Dynamics Corporation (NYSE:GD) is one of the best aerospace and defense stocks to buy right now. The company operates through four main segments including Aerospace, Marine Systems, Combat Systems, and Technologies Segment. The product portfolio ranges from business jets and shipbuilding, particularly for military applications to vehicles and weapons for land-based military operations.
The demand for its products remains robust, the company delivered 28 aircraft during the fiscal third quarter of 2024, with 24 large cabins and 4 G700s. This is a significant improvement to the 22 large cabins and no G700 delivered last year. As a result, General Dynamics Corporation (NYSE:GD) grew its revenue by 10.4% and operating earnings by 11.7%, to reach $11.7 billion and $1.2 billion, respectively. Its Aerospace segment is taking the lead with quarterly revenue up 22% year-over-year, driven by a 23% improvement in new aircraft sales during the quarter.
Moreover, its Combat systems segment is experiencing strong margin expansions and landed some notable awards during the quarter. It secured significant contracts related to the production of 155mm artillery components for the US Army, with a maximum potential value of $2.1 billion. Recently, the company also reported a contract valued at $885 million for various munitions and ordnance, which carries a maximum potential value of $1.7 billion. These contracts are part of a larger set of defense orders that totaled $10.5 billion in the quarter, reflecting strong demand in their Combat Systems and Technologies segments. The overall company-wide order stands at $92.6 billion indicating future growth prospects of General Dynamics Corporation (NYSE:GD) and making it one of the best aerospace and defense stocks to buy right now.
7. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 48
Northrop Grumman Corporation (NYSE:NOC) is one of the best aerospace and defense stocks to buy right now. The company is a titan in the industry especially known for its military hardware and space technology. It operates through four main business segments namely, Aeronautics, Defense, Mission, and Space Systems.
The latest quarter which is the fiscal third quarter of 2024 highlighted some interesting details about the company. On one hand, the total sales of Northrop Grumman Corporation (NYSE:NOC) grew rather slowly by only 2% year-over-year to reach $10 billion, with none of the segments posting significant growth. On the other hand, the company reported net awards of $11.7 billion, even bigger than its quarterly revenue, with a total backlog reaching a record high of $85 billion.
While none of the segments posted encouraging sales, its Space and Mission system segments enjoyed a big increase in profitability, with operating profits of the Space segment alone increasing 14% year over year. Space segment is now officially the second most profitable venture of Northrop Grumman Corporation (NYSE:NOC). Most of the new orders received by the company are related to either Mission system or Space system segments. Considering this, management anticipates that sales will exceed $41 billion and operating profits to be more than $4.5 billion this year across the company.
Carillon Eagle Growth & Income Fund stated the following regarding Northrop Grumman Corporation (NYSE:NOC) in its fourth quarter 2023 investor letter:
“Northrop Grumman Corporation (NYSE:NOC) pulled back in November following very strong performance in October that was tied to solid earnings and heightened geopolitical issues that included the war in Israel. While geopolitical issues remained front and center in November, tensions did not broaden to other areas through the end of the year.”
6. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 52
The Boeing Company (NYSE:BA) is a leading American aerospace and defense corporation that specializes in the design, production, and sale of aircraft, rotorcraft, rockets, satellites, telecommunications equipment, and missiles globally. It operates through three main business segments including Commercial Airplanes, Defense, Space, and Security, and Global Services.
The Boeing Company (NYSE:BA) is currently navigating a challenging period but has several factors that could lead to a recovery, making it one of the best aerospace and defense stocks to buy right now. The company reported a significant net loss of $6.17 billion in Q3 2024, contributing to nearly $8 billion in total losses for the year so far. This has raised concerns among investors about the company’s financial health. Moreover, the company has also faced ongoing supply chain disruptions and production slowdowns, particularly with its 737 MAX and other aircraft models. These issues have been exacerbated by a recent seven-week labor strike that halted production on key programs.
However, on the bright side, its backlog is valued at approximately $500 billion, which represents more than seven years of expected sales based on 2024 projections. This backlog includes numerous orders for commercial aircraft, indicating strong future demand. Moreover, the appointment of Kelly Ortberg as CEO is seen as a pivotal move. He aims to reset investor expectations and improve operational processes, particularly within Boeing’s defense segment, which has struggled with project estimations.
Fidelity Dividend Growth Fund stated the following regarding The Boeing Company (NYSE:BA) in its Q3 2024 investor letter:
“Overweighting The Boeing Company (NYSE:BA) also worked against the fund. The stock returned about -16% the past three months, sliding considerably in late July, as Q2 financial results for the aerospace giant came up well short of Wall Street’s expectations amid bigger-than-anticipated losses in both its commercial aviation and defense businesses. In July, the firm named former Rockwell Collins CEO Kelly Ortberg as its new president and CEO in an effort to move past ongoing production issues, cost overruns and delivery delays.”
5. HEICO Corporation (NYSE:HEI)
Number of Hedge Fund Holders: 57
HEICO Corporation (NYSE:HEI) is one of the best aerospace and defense stocks to buy right now. It engages in the manufacturing of parts for airplane engines and components. The company operates through two main segments including Flight Support Group (FSG) and Electronic Technologies Group (ETG).
The company has seen a substantial increase in its stock price, up 45% year-to-date, mainly due to high demand for its replacement parts to support existing aircraft fleets. During the first half of fiscal 2024, the company grew its revenue from aftermarket replacement parts by 79%, reaching $1.2 billion. Another notable factor contributing to this growth is a $2 billion acquisition of the Aerial Delivery and Descent Devices divisions of Capewell Aerial Systems, which HEICO Corporation (NYSE:HEI) made in 2023. It has expanded the company’s portfolio of aftermarket products.
The company posted encouraging results for its fiscal third quarter of 2024 as well. Its net sales increased by 37% to reach a record $992.2 million, whereas the operating income rose by 45% to a record $216.4 million. The growth was driven by sixteen consecutive quarters of sequential net sales growth at its Flight Support Group (FSG). Given the ongoing issues within the aviation industry, including Boeing’s quality control challenges, HEICO Corporation (NYSE:HEI) is well-positioned to benefit from increased demand for its products.
4. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 58
Lockheed Martin Corporation (NYSE:LMT) is a major international company that specializes in security and aerospace. The company focuses on creating advanced technologies and systems ranging from new aircraft to developing missile defense systems. They produce a wide range of military aircraft, missiles, satellites, and space systems. Its fiscal 2023 annual report shows that the company generated 96% of its revenue from defense-related sales.
The current geopolitical environment is characterized by ongoing conflicts and with Donald Trump’s return to the presidency in 2024 defense budgets are expected to rise higher thereby increasing orders for Lockheed Martin Corporation (NYSE:LMT). In fact, the company already has reached a record high backlog as its third quarter 2024 order backlog stood at more than $165 billion.
The company is well-known for producing the F-35 fighter jet, which is a cutting-edge military aircraft designed for various combat roles. During the third quarter management reported delivering 48 F-35s. In addition, Taiwan is considering purchasing 60 F-35 fighter jets from the company. Taking confidence from its year-to-date performance, management has raised its full-year guidance from the midpoint of $70.5 billion to $71.3 billion in net sales.
Conventum – Alluvium Global Fund stated the following regarding Lockheed Martin Corporation (NYSE:LMT) in its Q3 2024 investor letter:
“Lockheed Martin Corporation (NYSE:LMT) is a new investment for the Fund. This defence contractor had been on our radar for some time, and in July we pulled the trigger. Call it dumb luck, but by quarter’s end that initial 2.0% tranche had grown to 2.4% as a result of its 25.8% return. There was reason for it. In the interim Lockheed’s management reported impressive results revealing its strong backlog and upgrading its full year guidance. We increased our estimates slightly, but not enough to warrant increasing our position at what we now see to be a reasonably (perhaps slightly highly) priced business.”
3. TransDigm Group Incorporated (NYSE:TDG)
Number of Hedge Fund Holders: 71
TransDigm Group Incorporated (NYSE:TDG) is a company that designs, produces, and supplies specialized parts for aircraft. These parts are essential for both commercial and military airplanes. It specializes in highly engineered components which are sold as replacement (aftermarket) parts and to Original Equipment Manufacturers (OEMs).
One of the key competitive edges of the company comes from its range of proprietary aerospace components which are mainly sold in the aftermarket. Management has shifted its focus to the aftermarket segment as it generates more margins, as a result around 90% of its net sales for fiscal 2023 came from this segment.
In addition, TransDigm Group Incorporated (NYSE:TDG) has also been concentrating on expanding its proprietary product portfolio and has taken some bold steps toward this goal. For instance, management acquired SEI Industries and CPI Electron Device Business during the current fiscal year. Both companies have a line-up of specialized products catering to the aerospace and defense sectors.
During the fiscal third quarter of 2024, the company surpassed its revenue guidance by posting $2.05 billion, up 17.3% year-over-year. Its net income was also encouraging and improved by 31% during the same time to reach $461 million. Management has also revised its full-year EBITDA guidance from $3,995 million to $4,095 million to an updated range of $4,100 million to $4,160 million. It is one of the best aerospace and defense stocks to buy right now.
Mar Vista Strategic Growth Strategy stated the following regarding TransDigm Group Incorporated (NYSE:TDG) in its Q3 2024 investor letter:
“TransDigm Group Incorporated (NYSE:TDG) reported another earnings beat-and-raise during its fiscal third quarter as it continues to benefit from a surge in global travel, surpassing pre-pandemic levels. The airlines posted no significant change in aircraft order or delivery patterns despite overcapacity issues. Both Boeing and Airbus remain in a holding pattern on producing and delivering new units due to manufacturing quality and labor issues (strike) in the case of Boeing and supply chain challenges in the case of Airbus. This plays directly into the hands of TransDigm’s most profitable business, commercial aerospace aftermarket, as load factors remain high, and take-offs and landings continue to grow beyond pre-pandemic levels. Moreover, the company announced a significant special dividend to be paid in October 2024. Even with this payment, TransDigm has over $5.5 billion of capital to execute its acquisition strategy in what should be a robust M&A market in 2025.”
2. RTX Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 72
RTX Corporation (NYSE:RTX) is a specialized aerospace and defense company that provides advanced technology and services to commercial airlines, military forces, and government agencies around the world. It operates through three main segments, including Collins Aerospace, concerned with creating high-tech systems and services for aircraft, Pratt & Whitney, which specializes in designing and manufacturing aircraft engines, and Raytheon which develops systems for detecting and responding to threats, including missiles and air defense systems.
RTX Corporation (NYSE:RTX) has been doing well during the year, thanks to CEO Chris Calio for delivering on the commitments he made to investors upon appointment back in May. Calio had laid out recommendations for each of the three segments and fast-forwarding to third-quarter results progress concerning his commitments remains robust.
For Pratt & Whitney, the management was supposed to execute a geared turbofan (GTF) fleet management plan, the progress of which remains on track as engines are being removed and inspections are ongoing. The CEO had also indicated his commitment to improving the defense business (Raytheon) and the segment reported a record $16.6 billion in orders during the third quarter of fiscal 2024. The total backlog of the company now stands at $60 billion, considerably improved from the previous year.
1. GE Aerospace (NYSE:GE)
Number of Hedge Fund Holders: 95
GE Aerospace (NYSE:GE), is a prominent player in the aerospace industry. It focuses on manufacturing jet engines and propulsion systems for various types of aircraft, including commercial airliners, military jets, and private planes. It serves industry giants including Boeing and Airbus, while also serving the United States military.
It is one of the best aerospace and defense stocks to buy right now. The company in its March investor presentation laid out an optimistic and highly profitable outlook for the next three years. Management believes as the global travel and demand for airplanes is normalizing its products and services will be in business throughout the globe. Over the next three years, the company aims for high-single-digit sales growth, suggesting a steady increase in revenue by about 7% to 9% annually. Moreover, it also projects pre-tax earnings of $10 billion or more annually. This reflects a significant increase from earlier projections and indicates strong demand and operational efficiency.
GE Aerospace (NYSE:GE) generated $9.8 billion in revenue, indicating a 6% improvement year-over-year. Its GAAP profit came in at $1.9 billion indicating an even better year-over-year growth rate of 14%. The company also improved its total orders by 28% to reach $12.6 billion in total secured orders indicating that demand for its products remains robust. CEO H. Lawrence Culp, Jr. attributed the growth to strong demand for services, which led to increased earnings and cash flow. He noted improvements in engine deliveries and expansion of aftermarket capacity, which are crucial for sustaining growth.
While we acknowledge the potential of GE Aerospace (NYSE:GE) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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