We recently published a list of the 10 Best Performing Defense Stocks So Far in 2025. In this article, we are going to take a look at where Embraer S.A. (NYSE:ERJ) stands against other best performing stocks this year.
The world has been rocked with deadly conflicts over the last few years, with Ukraine and the Middle East up in flames. While the human impact of these wars has been tragic, the defense industry has profited by luring investors into piling up their stocks, with several of the world’s top contractors seeing their shares book all-time highs in 2024.
READ ALSO: 11 Best American Defense Stocks to Buy Now and 13 Best Defense Stocks to Buy According to Billionaires.
However, American defense stocks have been shaky this year amid mixed statements from the Trump administration on future military spending. Shares fell sharply in February after the US President mentioned he could significantly cut defense expenditure in the future. He made these comments in the context of a potential future conference with China and Russia to discuss cutting military expenditure to spend the money in other areas:
“At some point, when things settle down, I’m going to meet with China and I’m going to meet with Russia, in particular those two, and I’m going to say there’s no reason for us to be spending almost $1 trillion on the military and I’m going to say we can spend this on other things.”
The creation of DOGE has also reshaped investors’ views of the industry. On March 3, the Pentagon, working with DOGE, found some $80 million in what it deemed wasteful funding, which included funds devoted to diversity, equity and inclusion programs, and climate change research.
Despite the downturn, Citi analyst Jason Gursky believes this is the right time to invest in American defense stocks. In a note to clients on March 5, he argued that as long as the global threat environment remains and the United States maintains its leadership role, regardless of whether it is as a sole superpower or as a power in a multi-polar world order, defense spending is expected to remain robust, which would benefit stocks in the sector.
Two recent developments have reinvigorated investor interest in defense stocks. On March 21, Trump unveiled a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. The jet will be for air superiority and have stealth and penetration capabilities that exceed those of the current fleet. The initial contract to proceed with the production is expected to cost approximately $20 billion.
The move adds to the positive momentum after President Trump’s announcement earlier in the month to resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security, given the strategic competition with China.
An engineer examining a detailed blueprint of an aircraft.
Our Methodology
For this article, we went through screeners to identify stocks in the aerospace and defense industry. From there, we picked the top 10 stocks with the highest year-to-date percentage gains in share price, as of the close of business on March 25, 2025. Pure-play aerospace stocks that do not deal in defense contracts have been excluded from the list.
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).
Embraer S.A. (NYSE:ERJ)
YTD Gains as of March 25: 33.29%
Embraer S.A. (NYSE:ERJ) is a Brazil-based jet manufacturer that produces aircraft for commercial and executive aviation and defense purposes. It is one of the best performing stocks this year.
2025 has been an impressive year for the company, with returns of over 33% year-to-date in its share price, driven by multiple high-value orders. On February 5, Embraer S.A. (NYSE:ERJ) signed a $7 billion agreement with Flexjet for 182 aircraft and 30 options. This is the largest firm order for both companies and is set to double the size of Flexjet’s fleet over the next 5 years.
Later in the month, on February 25, Japan’s ANA Holdings placed an order for 15 Embraer S.A. (NYSE:ERJ) E190-E2 planes to support its domestic operations, with options for an additional five aircraft. The deliveries are expected to commence in 2028.
Investor sentiment has also been strengthened with the visit of Francisco Gomes Neto, Embraer’s President and CEO, to Warsaw in March. According to Reuters, the company is considering establishing an assembly line for its KC-390 military cargo aircraft in Poland, amid a surge in plane sales in Europe.
On February 27, Embraer S.A. (NYSE:ERJ) declared robust results for the fourth quarter and full year 2024. It generated a revenue of $2.3 billion in Q4, up 17% from last year. Full year revenue stood at $6.4 billion, the highest ever in the company’s history. The adjusted EBIT for Q4 was $265 million, with a margin of 11.5%. For 2024, the company generated $780 million with an 11.1% margin. It ended the year with a record order backlog of $26.3 billion.
Overall, ERJ ranks 6th among the best performing defense stocks so far in 2025. 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. If you are looking for an AI stock that is more promising than ERJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.