This article looks at the 8 best military drone stocks to buy according to analysts. We also dive into unmanned aerial vehicle (UAV) industry trends.
Demand for military drones has surged over the last few years amid deadly escalations breaking out in different parts of the world. These unmanned aerial vehicles (UAV) were a prominent feature in the 2020 conflict between Azerbaijan and Armenia in the Nagorno-Karabakh region. They have also been clouding the skies in Kyiv, Kharkiv, and Borodyanka as the Russia-Ukraine war approaches the 1000-day mark, with no immediate end in sight.
READ ALSO: 10 Countries with the Most Military Drones in the World and 7 Most Undervalued Defense Stocks To Buy According To Analysts.
UAVs offer an unprecedented bird’ s-eye view of the battlefield, making it difficult for enemy targets to move and hide from the theatre of war. An increasing number of countries are actively deploying military drones within and outside their borders for intelligence, reconnaissance, surveillance, and target operations, in what is being seen as the arrival of a new threat in the aerial defense space.
According to a report, the drone industry was valued at $30.2 billion in 2024 and is projected to reach $48.5 billion in 2029, at a CAGR of 9.9% during this period. This has already been a healthy year for the drone market. For perspective, a major ETF issued by AdvisorShares has gained 15.46% YTD, outperforming the broader market by two percentage points. The market’s growth is fueled by the need for enhanced aerial security and the advancements in technologies being made in the UAV industry.
There is active work ongoing in building drone defense systems as well to guard countries against the threats posed by UAVs. In early October this year, the Department of Defense (DOD) awarded a $250 million contract to Anduril Industries to counter drone attacks against American forces. Under the contract, the US will receive 500 recoverable Roadrunner interceptors.
Roadrunners are reusable drones that can intercept incoming drones or land back on the ground if they are not engaged. Anduril did not name the DOD customer for security concerns, however, the company stated that the contract would serve the American military in ‘priority regions where U.S. forces face significant UAS threats’.
Anduril Industries also recently unveiled a new, autonomous drone called Bolt after the success of similar products in Ukraine. The vertical takeoff and landing (VTOL) autonomous vehicle will provide militaries with capabilities for a range of missions, from ISR to search and rescue. The drone also comes with a munition variant, called Bolt-M, to arm ground troops on the battlefield by making quick and precise strikes.
Compared to the use of costly and vulnerable fighter jets, loitering munitions after surveying the area through unmanned aerial vehicles has proven much more effective in the ongoing war between Russia and Ukraine, resulting in a surge of demand for military drones. With that said, let’s shift our focus now on the best military drone stocks to buy according to analysts.
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Methodology
We sampled stocks from ETFs with military drone exposure and our own previous related articles on the subject. Then we narrowed down the list to the eight top stocks preferred by analysts, basing our rankings on their median share price upside potential and the number of analysts who had made projections about these companies, as of October 25, 2024.
We first ranked the stocks on each of these two metrics and followed it up by assigning the two metrics their respective weights, which were 40% for the median share price upside potential and 60% for the analyst count. This was followed by calculating the weighted ranking for each metric, and then aggregating the two to get an overall weighted ranking score. The 8 Best Military Drone Stocks To Buy According to Analysts are ranked in descending order of these weighted rankings.
Since only a few public companies are operating in the military-drone industry, we did not have a lot of choices for stocks, and one of these stocks had a negative median upside so we ranked it on a positive mean upside instead, which was based on the contribution of 5 analysts. This stock’s mean share price upside potential was assigned a weightage of 40% as well.
For added perspective, we also mentioned the sentiment of the hedge funds towards each stock from Insider Monkey’s database of 912 hedge funds for the second quarter of 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Military Drone Stocks To Buy According to Analysts:
8. AeroVironment, Inc. (NASDAQ:AVAV)
Mean Share Price Upside Potential: 1.4%
Total Analysts: 5
Number of Hedge Fund Holders: 24
Weighted Ranking: 8
AeroVironment, Inc. is an American defense contractor that designs and manufactures unmanned aerial vehicles, ground robot systems, and loitering munition systems. It is one of the best military drone stocks to buy according to analysts. Its share price has significantly grown by 71% year-to-date, driven by a surge in demand for autonomous systems amid global geopolitical tensions.
The company’s financial performance has been consistently improving over the last few years, with full-year revenue growing from $367.3 million in 2020 to $716.7 million for the year ending June 2024. On September 4, AeroVironment announced quarterly results for Q1 2025, and posted a revenue of $189.5 million, registering a 24% year-over-year increase. This was also a new first-quarter revenue record for the defense company.
Strong results during the recent quarter were fueled by continued upward momentum in the company’s Loitering Munition Systems segment, which posted record revenue of nearly $52 million, expanding 68% from the same period last year. Net income for the quarter stood at $21.2 million, down from $21.9 million last year due to a $10 million increase in SG&A expenses and $9.1 million worth of investments in R&D. Despite the dip, the company logged an EPS of $0.89, comfortably beating earnings estimates of $0.61 per share.
Considering its healthy backlog, key contract awards, and robust pipeline, AeroVironment, Inc. (NASDAQ:AVAV) expects solid results for Q2 2025 and anticipates half-year revenue to account for 45% of its full-year sales. It is also confident of meeting its full-year guidance and believes that fiscal year 2025 will be a ‘great year’ for its investors, customers, and employees.
Wall Street analysts have a consensus on the stock’s Buy rating. Hedge fund sentiment around the stock also continues to improve. According to financial website, Insider Monkey, 24 hedge funds amongst those that it tracks had investments in AeroVironment, Inc. (NASDAQ:AVAV) at the end of Q2 2024, up from 20 after the first quarter.
The bullish sentiment around the stock was further bolstered in August this year when the company was awarded a $990 million contract to provide Switchblade loitering munitions for the U.S. Army’s infantry battalions. These are tube-launched munitions that launch like switchblade knives upon ejection and detonate after striking targets. These can be flown like drones.
7. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
Median Share Price Upside Potential: 4.38%
Total Analysts: 10
Number of Hedge Fund Holders: 24
Weighted Ranking: 6
Kratos Defense & Security Solutions is an American company that develops and fields transformative and affordable products and platforms for national security needs. It is involved in various technological areas, such as unmanned systems, C5ISR, satellite communications, warfighter training, and combat systems.
The company has made notable strides in the military drone industry. In April this year, Kratos announced that its Unmanned Systems Division successfully demonstrated electronic warfare capabilities for the XQ-58 Valkyrie. The unmanned combat aerial vehicle is able to fly in concert with two F-35 fighter jets and deliver integrated electronic attacks.
The demonstration completed Phase 1 of the United States Marine Corps’ Penetrating Affordable Autonomous Collaborative Killer – Portfolio (PAACK-P) program and followed the award of a $22.9 million “Phase 2” contract modification in December for further engineering development and flight test demonstrations.
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) declared its financial results for Q2 2024 on August 7. The company posted a revenue of $300.1 million during the quarter, exceeding its estimated range of $265 million to $280 million. This was driven by better-than-expected performances across most of its business segments, especially the unmanned systems, turbine technologies, microwave products, and C5ISR businesses. It generated around $17.4 million of the overall revenue from delivery on an international Middle Eastern drone program, which was initially slated for Q3.
Adjusted EBITDA stood at $29.9 million. Net income for the quarter was recorded at $7.9 million, translating to a GAAP EPS of $0.05 and an adjusted EPS of $0.14. Kratos’ Unmanned Systems Segment (KUS) posted revenues of $85.8 million, compared to $52.1 million during the same quarter in 2023, resulting in an organic revenue growth of 61.8%, driven by increased domestic target drone production and delivery of a drone program in the Middle East.
Owing to increased demand for UAVs, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is expanding its Oklahoma drone manufacturing capabilities and is also considering adding another additional facility. The company currently has an estimated $12 billion worth of opportunity pipeline, which includes classified opportunities in its Unmanned Systems business and space, cyber, and training businesses.
The management has reaffirmed its 2024 financial guidance and its forecasted future year-over-year organic growth rate of 10%. Wall Street analysts remain bullish on the stock and have consensus on its Buy rating. Kratos is one of the best military drone stocks to buy according to analysts.
6. Honeywell International Inc. (NASDAQ:HON)
Median Share Price Upside Potential: 4.33%
Total Analysts: 11
Number of Hedge Fund Holders: 50
Weighted Ranking: 5.2
Honeywell International is an American conglomerate that helps organizations address their most complex challenges in aviation, automation, and energy transition through its four business segments – Aerospace Technologies, Building Automation, Industrial Automation, and Energy and Sustainability Solutions.
The company is an important player in the military drone market. In September this year, Honeywell International Inc. (NASDAQ:HON) unveiled its Stationary And Mobile UAS Reveal And Intercept system, which has been selected by the U.S. Air Force’s Global Strike to counter swarm drones and protect critical assets. The demonstration is expected to take place in January 2025.
On October 17, Honeywell signed a Memorandum of Understanding (MOU) with Merlin Labs aimed at bringing autonomy to a variety of military aircraft. Under the agreement, Honeywell Anthem’s advanced avionics suite will be integrated with Merlin’s non-human pilot system, called Merlin Pilot, to reduce pilot workloads during special missions. The collaboration between the two companies will initially be focused on fixed-wing military aircraft, before expanding to other commercial and military planes.
Honeywell International Inc. (NASDAQ:HON) announced its third-quarter 2024 results on October 24. Sales for the quarter were posted at $9.7 billion, which was up 3% but fell short of expectations due to project delays, a flat performance in Industrial Automation, and supply chain disruptions. The figure was also impacted by manufacturing disturbances caused in September by Hurricane Helena and a fire at an aerospace technology plant.
Despite these challenges, the company logged an EPS of $2.58, growing 8% year-over-year, and beating expectations of $2.52 per share. This was owed to a strong performance by Honeywell in its Aerospace Technologies business. The segment recorded its ninth successive quarter of double-digit organic growth, with sales increasing 10% year-over-year.
The company has successfully closed four acquisitions this year valued at over $9 billion, including two in the recently concluded quarter, those of CAES Systems Holdings LLC and Air Products’ LNG Business. These acquisitions are set to enhance Honeywell’s portfolios in defense and energy solutions businesses and open new revenue streams.
Looking ahead, the American conglomerate has forecast sales to be between $10.2 billion and $10.4 billion for Q4, up 2% to 4% organically, and expects the gains to be driven by its Aerospace business. Full-year sales are anticipated to be in the range of $38.6 billion to $38.8 billion. Honeywell is one of the best military drone stocks to buy according to analysts, with a median upside potential of 4.33% in its share price. Wall Street analysts also have a consensus on the stock’s Buy rating.
5. Textron Inc. (NYSE:TXT)
Median Share Price Upside Potential: 21.43%
Total Analysts: 9
Number of Hedge Fund Holders: 26
Weighted Ranking: 5
Textron is an American conglomerate that manufactures products for consumers across several industries, including aerospace and defense, specialized vehicles, fuel systems, and turf care. It operates within six business segments: Bell, Textron Aviation, Textron eAviation, Textron Systems, Industrial, and Finance.
In Q2 2024, the company reported revenue of $3.5 billion, up from $3.4 billion during the same period in 2023. Its quarterly adjusted profit was $1.54 per share, beating analysts’ estimates of $1.48 per share and growing 5.5% year-over-year. The strong results were driven by high demand across business segments that manufacture military helicopters and private jets.
Revenue at Textron Aviation rose 8% to reach $1.5 billion during the quarter. Bolstered by higher jet pricing, the segment generated profits of $195 million, significantly higher from $24 million in Q2 2023. Bell also posted a 13% increase in its revenue, driven by a higher military volume on the back of its contract with the DOD on the Future Long Range Assault Aircraft program.
There were also notable highlights from the quarter as far as UAVs are concerned. The company is a recognized industry leader in uncrewed, air, land, and surface products, and in May 2024, Textron Systems was selected by the U.S. Army for the Future Tactical Uncrewed Aircraft System (FTUAS) Option 3 and Option 4 award. Under the arrangement, Textron Inc. (NYSE:TXT) will complete flight and MOSA demonstrations, and deliver an Aerosonde Mk. 4.8 Hybrid Quad (HQ) uncrewed aircraft system (UAS) to the Army for testing and evaluation.
Textron eAviation also acquired the assets of Amazilia Aerospace, a Munich-based engineering company with expertise in digital flight control, flight guidance, and vehicle management systems for manned and unmanned aircraft. The acquisition will enhance Textron Inc. (NYSE:TXT)’s capabilities in the UAV sector, through an expanded technology portfolio.
Robust results during Q2 and positive developments on FTUAS have led to a general bullish sentiment around the stock. Wall Street analysts have a consensus on Textron’s Buy rating with a median share price upside potential of 21.43%. Considering its high upside potential, Textron Inc. (NYSE:TXT) is one of the best military drone stocks to buy according to analysts.