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.
4. RTX Corporation (NYSE:RTX)
Median Share Price Upside Potential: 5.47%
Total Analysts: 15
Number of Hedge Fund Holders: 54
Weighted Ranking: 3.8
RTX Corporation is a giant in the global aerospace and defense industry, providing systems and services to clients in the commercial, military, and government sectors. The company operates through three main businesses: Collins Aerospace, Pratt & Whitney, and Raytheon.
Its relevance as a military drone stock stems from its focus on drone-based missile systems and counter-drone technologies. RTX’s expertise in radars, sensors, and electronic warfare offerings also reinforces its strong position in the global military drone market.
In October this year, the company showcased the capabilities of its counter-drone technology to the U.S. Army at the Yuma Proving Ground in Arizona, in which its Coyote Block 2 and Block 3 effectors and Ku-band Radio Frequency Sensor (KuRFS) were tested as part of the Army’s counter-drone solution. Both pieces of equipment excelled in the stress tests, validating the enhancements made by RTX Corporation (NYSE:RTX) to these systems.
RTX announced its third-quarter financial results for 2024 on October 22, reporting sales of $20.1 billion, up 6% year-over-year, and 8% organically. The strong results were fueled by an 11% growth in commercial aftermarket sales, on top of the 25% rise last year driven by the growth in global air travel. Defense-related sales also grew 10% during the quarter. Adjusted EPS was logged at $1.45, rising 16% from last year, and beating expectations of $1.34 per share.
Collins Aerospace segment generated a 6% increase in revenue from last year to reach $7.08 billion, while sales at Pratt & Whitney were reported at $7.24 billion, growing 14% on both adjusted and organic basis. There was a 1% dip in sales figures at Raytheon, which totaled $6.4 billion. This was due to the cybersecurity divestiture during the first quarter.
RTX Corporation (NYSE:RTX) ended Q3 with a backlog of $221 billion, comprising $90 billion of defense and $131 billion worth of commercial orders. After robust results in Q3, the company has raised its outlook for the full year 2024. It now expects sales for the year to be in the range of $79.25 billion to $79.75 billion, up from $78.75 billion to $79.5 billion. EPS is projected to be between $5.50 and $5.58 per share.
The overall sentiment among Wall Street analysts about RTX is positive. They have a consensus on its Buy rating and anticipate a median upside potential in its share price of 5.47%. It is one of the best military drone stocks to buy according to analysts.
3. Lockheed Martin Corporation (NYSE:LMT)
Median Share Price Upside Potential: 10.26%
Total Analysts: 11
Number of Hedge Fund Holders: 56
Weighted Ranking: 3.6
Lockheed Martin is the largest defense contractor in the world, with over $67 billion in revenue in 2023, of which 96% came from defense-related sales. It is famed for producing some of the most notable military aircraft in history, including the F-35 fifth-generation fighter jet. For the last several decades, the company has also been delivering advanced autonomous solutions to the U.S. military to meet the needs of its most demanding missions.
It is the RQ-170 Sentinel unmanned aerial vehicle maker, which the U.S. Air Force continues to fly over complex conflict zones. According to The National Interest, the stealth drone is believed to have played a role in the operation that killed Osama bin Laden in 2011. Some other prominent UAVs that Lockheed Martin Corporation (NYSE:LMT) manufactures include Indago 4 and The Stalker.
The company announced its third quarter 2024 financial results on October 22. Net sales for the quarter grew 1.2% year-over-year to $17.1 billion, driven by robust performances from Missiles and Fire Control, and Rotary and Mission Systems segments. Net earnings totalled $1.6 billion, translating to an EPS of $6.80 per share, which beat expectations of $6.54, and was seven cents higher than in the same period last year.
After these strong results, Lockheed Martin Corporation (NYSE:LMT) has increased its guidance for the full year, and now expects annual revenue in 2024 to be $71.25 billion, reflecting a 5% growth from 2023. The company has also raised its segment operating profit margin and now expects it to be around 10.5%, driven by the anticipation of a higher sales volume. It has also upgraded its EPS forecast by 30 cents to $26.65 per share.
The defense contractor continues to invest heavily in autonomy and artificial intelligence. It has demonstrated its capabilities in crewed-uncrewed teaming, AI-driven autonomous systems, and integrated technologies at numerous U.S. Army events this year. During one of these demonstrations, it launched an autonomous drone to provide overwatch guidance to a ground-based robot navigating a dangerous urban terrain.
Lockheed Martin is one of the best military drone stocks to buy according to analysts, who have a consensus on its Buy rating and anticipate a 10.26% uptick, in median terms, in its share price. It remains a popular stock among hedge funds as well. Among hedge funds tracked by Insider Monkey, 56 held investments in the company, as of Q2 2024.
2. Northrop Grumman Corporation (NYSE:NOC)
Median Share Price Upside Potential: 8.79%
Total Analysts: 16
Number of Hedge Fund Holders: 49
Weighted Ranking: 2.8
Northrop Grumman is one of the largest defense contractors in the world. The company is the manufacturer of the B-21 Raider for the United States Air Force (USAF), which was formally unveiled in December 2022. The long-range, stealth strategic bomber, intended to replace the aging fleet of the B-1B Lancer and B-2 Spirit, is scheduled to enter service from the mid-2020s onwards.
The company is also a leader in autonomous aerial systems and is the maker of the RQ-4 Global Hawk unmanned aircraft system, which has amassed over 320,000 flight hours, and is noted for its role in surveillance and intelligence operations in Afghanistan, Iraq, and parts of North Africa. In April this year, Northrop Grumman Corporation (NYSE:NOC) was awarded a $387 million foreign military sales contract from the DOD to sustain Italy, Japan, and South Korea’s RQ-4 Global Hawk drones.
It also developed the MQ-4C Triton, which is one of the most advanced maritime ISR UAVs deployed today. The drone has immense export potential. Australia received its first of four ordered Triton drones in June this year, with the remaining three still in production. Kathy Warden, NOC’s Chair, CEO, and President, stated the following about Tritron’s growth prospects in the Q2 2024 earnings call on July 25:
We are excited that both NATO and Norway have expressed interest in Triton, and we are hopeful that announcements will be coming shortly on both. And as we look to build Triton for the U.S. and Australia, this simply adds to the production line outlook for Triton through the decade. And so we had envisioned this day coming where more countries would get the opportunity to see Triton once it was fielded has a tremendous ability to surveil large areas of the ocean. You can think of the relevance to that in the Pacific, which is what was attractive to Australia and the U.S. Navy, but of course, in the Arctic, this is an area of great importance as well, which is driving to NATO and the Norwegian interest.
The company declared its third quarter 2024 results on October 24. It posted sales of approximately $10 billion, up 2% from last year, driven by a surge in demand for advanced weapons amid intense escalations in the Middle East and the Ukraine-Russia war. Aeronautics Systems revenue grew 4% year-over-year to $2.9 billion, with gains attributed to higher F-35, E2, and Triton volumes.
Sales at Defense Systems expanded by 2% due to higher sales of Sentinel and other weapons from NOC’s portfolio. Mission Systems also registered a 7% increase in its sales, fueled by a higher volume of microelectronics and advanced technology programs. As a result, Northrop Grumman Corporation (NYSE:NOC) posted an EPS of $7, comfortably beating expectations of $6.08 per share.
The company reaffirmed its full-year 2024 sales guidance to between $41 billion and $41.4 billion from the second quarter. However, it has raised its MTM-adjusted EPS guidance to be in the range of $25.65 – $26.05, up from $24.90 – $25.30 at the end of Q2. Northrop Grumman Corporation (NYSE:NOC) is one of the best military drone stocks to buy according to analysts, with a consensus among Wall Street experts on its Buy rating.
1. The Boeing Company (NYSE:BA)
Median Share Price Upside Potential: 29.02%
Total Analysts: 22
Number of Hedge Fund Holders: 42
Weighted Ranking: 1
Boeing is a leading aerospace company that manufactures commercial airplanes, space systems, and defense equipment for customers in more than 150 countries. It also has an impressive product line of unmanned vehicles that operate in the air, across the sea, on the ground, and beyond the Earth’s atmosphere.
In February this year, The Boeing Company (NYSE:BA) delivered the first MQ-25 Stingray to the U.S. Navy for testing. This is the first carrier-based aircraft that does not require a pilot to be added to the Navy’s fleet. The drone will provide aerial refueling capabilities to extend the combat range of deployed fighter jets.
Another prominent UAV built by the company is the ScanEagle, which provides low-altitude surveillance and reconnaissance capabilities. Boeing is also the maker of the MQ-28 Ghost Bat, a stealth, multirole, unmanned combat aerial vehicle, which is primarily flown by the Royal Australian Air Force.
2024 has been a rough year for Boeing, with its shares losing over 40% of their value, year-to-date. It got off to the worst possible start in January, after a door plug of an Alaska Airlines 737 Max 9 flight fell off after takeoff. Since the incident, there has been a slowdown in the production of airplanes, with an increased focus on safety. It is also in the midst of a labor crisis, with around 33,000 workers going on a strike since September 13, demanding higher wages, job security, and a restoration of their pension.
On October 23, the company announced its financial results for the third quarter of 2024. Revenue was recorded at $17.8 billion, down 1% year-over-year, due to the impact of lower commercial wide-body deliveries and the IAM strike. This resulted in a quarterly loss of over $6 billion, translating to a loss per share of $10.44, which was worse than forecasts of a $10.35 loss per share.
Despite the challenges, most analysts believe that Boeing is too big a company to fail, and with a backlog of orders worth $500 billion and international travel growing every year, it is bound to recover once the headwinds are over. It booked $8 billion in orders during the quarter, which included a $2.6 billion award from the U.S. Air Force for two E-7A Wedgetail aircraft. The aerospace giant is also working on another key defense project, the NGAD program, which aims to develop a sixth-generation fighter jet to replace the F-22 Raptor by 2030.
Wall Street analysts have consensus on the stock’s Buy rating and expect a median upside potential of over 29% in its share price, which makes The Boeing Company (NYSE:BA) the best military drone stock to buy according to analysts.
Overall, BA ranks first among the 8 Best Military Drone Stocks To Buy According to Analysts. While we acknowledge the potential of military drone companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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