🛡️ DEFENSE STOCKS TOP 5 | HWM +82% Aerospace Boom 2025

Published: January 2, 2026 | Category: US Stock Market, Defense, Aerospace

Geopolitical tensions = DEFENSE stock gains! NATO rearmament in full swing! 🛡️ Global defense spending is increasing at the fastest pace since the Cold War, driven by the Russia-Ukraine conflict, Indo-Pacific security concerns, and Middle East instability. Many NATO countries are correcting decades of under-investment.

The Trump administration has proposed a $1.01 trillion defense budget for FY2026, a 13% increase from the previous year. Several NATO members including Poland, Lithuania, and Estonia are now committing up to 5% of GDP to defense spending—a historic shift from pre-2022 levels.

2025 Performance Analysis

Howmet Aerospace emerged as the top-performing defense stock of 2025, surging 82% on the back of exceptional aerospace demand. The company specializes in mission-critical jet engine components, aerospace fastening systems, and airframe structural components with approximately 1,170 granted and pending patents.

Q3 2025 results exceeded all guidance metrics: revenue growth accelerated to 14% YoY, Adjusted EBITDA margin reached 29.4% (+290 bps YoY), and free cash flow hit $423 million. CEO John Plant noted “healthy demand across commercial aerospace, defense aerospace, and industrial markets.”

In December 2025, Howmet announced a transformative $1.8 billion acquisition of Consolidated Aerospace Manufacturing (CAM) from Stanley Black & Decker, strengthening its aerospace fastening portfolio. Jefferies estimates the deal could be 2% accretive to 2026 EPS.

2026 Outlook

Analysts maintain a “Strong Buy” consensus with average price target of $213.57. Key catalysts include: CAM acquisition integration, continued aerospace spare parts demand, and defense aerospace growth (+13% YoY in Q3). Fitch upgraded Howmet’s credit rating from BBB to BBB+, reflecting strengthening financial leverage.

2025 Performance Analysis

RTX Corporation (formerly Raytheon Technologies) delivered exceptional results driven by its massive $251 billion backlog and Patriot missile system demand. Q3 2025 revenue of $22.48 billion was up 11.89% YoY, with EPS of $1.70 beating estimates by $0.29.

The Raytheon segment saw +10% sales growth with Patriot missile orders through the roof. The company has doubled Patriot production using AI-enhanced manufacturing. CEO Calio highlighted “dual-stream resilience” with defense at 40% of the business mix.

RTX raised both full-year revenue and profit forecasts: adjusted sales of $86.5-87.0 billion (up from $84.75-85.5B) and adjusted EPS of $6.10-6.20 (up from $5.80-5.95).

2026 Outlook

Morgan Stanley raised price target to $215 from $180, Susquehanna to $205 from $175. RTX’s dual revenue streams (defense + commercial aviation via Pratt & Whitney) provide resilience. Key catalysts include: Golden Dome missile defense development, continued NATO rearmament, and commercial aviation recovery.

2025 Performance Analysis

Northrop Grumman specializes in advanced weapons, aircraft, missile defense, and space systems. Q3 2025 sales of $10.4 billion were up 4% YoY, with EPS of $7.67 (well ahead of $6.46 consensus). Record Q2 EPS of $8.15 was up 28% YoY.

The B-21 Raider bomber program is ramping up, representing a multi-decade revenue stream. The company’s backlog stands at $89.7 billion, “inclusive of strong international bookings.” Recent $1.4 billion contracts support Poland’s air and missile defense systems.

Outside the U.S., Europe accounts for more than half of Northrop’s international revenue, and that could soar significantly as NATO countries pledge to ramp up defense spending.

2026 Outlook

Morgan Stanley: Northrop Grumman = TOP defense pick for 2026! JP Morgan raised price target to $640 from $585, Susquehanna to $690 from $650. Key catalysts include: B-21 production ramp, Golden Dome missile defense contracts (up to $764M awarded), and European rearmament demand.

2025 Performance Analysis

Lockheed Martin is the world’s largest defense contractor, dominating global defense procurement with record demand for the F-35 fighter jet across Europe and Asia (Poland, Japan, Finland, Denmark). Q3 2025 sales of $18.6 billion were up 8.8% YoY, with EPS of $6.95 beating estimates by $0.60.

The company’s backlog surpassed $179 billion in Q3 2025—more than 2.5 years’ worth of revenue—reflecting long-term visibility from multi-year NATO and U.S. modernization programs. HIMARS demand from Ukraine continues to drive orders.

Recent contract wins include $11 billion in F-35 Lots 18/19, plus missile systems and hypersonic development programs. Free cash flow for Q3 was $3.3 billion vs $2.1 billion in Q3 2024.

2026 Outlook

Mean analyst price target of $524.41 implies ~10.5% upside. Key catalysts include: continued F-35 export wins, Golden Dome missile defense (up to $1.1B MWTD satellite contract), hypersonic weapons development, and NATO countries exceeding 2% GDP spending.

2025 Performance Analysis

General Dynamics is one of the most diversified defense companies, with a portfolio spanning Virginia-class submarines, Abrams tanks, Stryker vehicles, and Gulfstream business jets. The company benefits from the U.S. Navy’s aggressive modernization program and Europe’s renewed demand for armored vehicles.

Recent contract wins include additional orders for Virginia-class submarines and expanded Abrams tank upgrades for NATO allies including Poland and Romania. The company’s backlog exceeds $95 billion, providing exceptional earnings stability.

Gulfstream jet deliveries are rebounding as global corporate travel recovers, providing revenue diversification beyond pure defense plays.

2026 Outlook

Analysts forecast 11-12% EPS growth over the next two years, driven by margin expansion from supply chain efficiencies. Key catalysts include: Columbia-class submarine program, NATO ground vehicle demand, and Gulfstream recovery. The 34-year dividend history appeals to income-focused investors.