We recently published a list of 10 Defense Stocks with the Highest EPS Growth in 5 Years. In this article, we will take a look at where AAR Corp. (NYSE:AIR) stands against other stocks with the highest EPS growth during this period.
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 technician inspecting a commercial jet engine in a specialized testing facility.
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).
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.
Overall, AIR ranks 4th 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 timeframe. 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 AIR but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
