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3 Aerospace-Defense Stocks Poised for Growth on Defense Modernization
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The Zacks Aerospace-Defense industry is benefiting from rising geopolitical tensions, higher military spending and continued air-travel demand, as governments accelerate defense modernization and invest in advanced weapons. Long-term defense procurement and lifecycle-support programs are also providing contractors with greater revenue visibility and earnings stability. Persistent supply-chain constraints, labor shortages, limited aircraft availability and higher operating costs remain key headwinds that continue to affect production, deliveries and airline profitability. The leading companies in the aerospace-defense industry that you might want to keep an eye on are GE Aerospace (GE - Free Report) , RTX Corporation (RTX - Free Report) and Howmet Aerospace (HWM - Free Report) .
About the Industry
The Zacks Aerospace-Defense industry comprises companies that primarily design and manufacture heavy-built products like commercial as well as military jets and helicopters, tankers and other combat vehicles, missiles, combatant ships as well as auxiliary ships, submarines, bombs, guns, space transportation vehicles, military satellites and a few more. The industry also includes cybersecurity players that offer information technology services and C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) solutions. A portion of its revenues comes from defense contractors offering spare parts, aircraft modification, ship repair and overhaul services, and supply-chain management services.
3 Major Trends in the Aerospace-Defense Industry
Geopolitical Tensions & Rising Military Modernization: Heightened geopolitical uncertainty is prompting governments worldwide to accelerate defense modernization and expand military expenditures. As defense priorities shift toward strengthening national security, contractors are increasingly securing long-term procurement programs that extend beyond initial equipment sales to include sustainment, modernization, training and lifecycle support. These multi-year programs provide greater revenue visibility, improve cash flow stability and support sustained earnings growth.
The U.S. defense industry is seeing stronger demand as the Pentagon and allied governments shift spending toward next-generation military capabilities, including advanced weapons, missile defense, unmanned and autonomous platforms, space systems, cyber technologies and modern aircraft. Recent conflicts have underscored the importance of maintaining adequate inventories of missiles and munitions, encouraging governments to accelerate procurement and expand domestic defense production. According to a Markets and Markets report, the Military Platforms market was estimated at $38.75 billion in 2025 and is expected to reach around $76.25 billion by 2032, registering a CAGR of about 10.2% during the period. Market growth is primarily driven by sustained defense modernization programs, replacement of aging land, naval, and air platforms, and continued investment in higher-capability military systems.
Air Traffic View Boosts Opportunities: According to a report by the International Air Transport Association (“IATA”), global air passenger demand is expected to grow 2.1% year over year in 2026. IATA reported that global passenger demand returned to growth in July 2026, with Revenue Passenger Kilometers (“RPK”) increasing 0.2% year over year, following contractions in May and June. Capacity rose 0.3%, while the global passenger load factor remained high at 85.2%, indicating resilient underlying air-travel demand despite elevated fuel costs, economic uncertainty and geopolitical tensions. Defense companies, especially those tied to aerospace manufacturing and technology, benefit through technological advances and improved production economics.
Supply-Chain Issues Continue to Act as a Headwind: The Aerospace and Defense industry continues to face supply-chain challenges that originated during the pandemic, when a sharp decline in aircraft demand led suppliers to reduce production capacity, scale back investments and shrink their workforces. Although demand has recovered strongly, many suppliers are still struggling to ramp up production, resulting in shortages of critical components, longer lead times, and delays in aircraft manufacturing and deliveries. According to IATA, airlines are facing higher operating costs because supply-chain problems have made spare parts more expensive and harder to obtain. Airport fees, air traffic charges and aircraft ownership costs have also increased. With new aircraft in short supply, airlines are leasing older, mid-life planes at higher rates. These older aircraft also consume more fuel, further increasing overall expenses. IATA has highlighted that limited aircraft availability and labor shortages remain key supply-side challenges, while broader disruptions continue to delay the timely production and delivery of essential systems.
Zacks Industry Rank Reflects Gloomy Outlook
The Zacks Aerospace-Defense industry is housed within the broader Zacks Aerospace sector. It currently carries a Zacks Industry Rank #179, which places it in the bottom 28% of more than 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is due to a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have lost confidence in this group’s earnings growth potential over the past few months. The industry’s bottom-line estimate for the current fiscal year has moved down 0.5% to $3.86 since July 31.
Before we present a few aerospace-defense stocks that you may want to add to your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Lags S&P 500 & Sector
The Aerospace-Defense industry has underperformed the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have collectively lost 14.3%, while the Zacks Aerospace sector has declined 12.3% during the same period. The Zacks S&P 500 composite has gained 16.9%.
One-Year Price Performance
Industry's Current Valuation
Based on trailing 12-month EV/Sales, a valuation metric commonly used for capital-intensive industries like aerospace and defense, the industry is currently trading at 2.61X compared with 5.69X for the S&P 500 and 2.88X for the sector.
Over the past five years, the industry has traded as high as 3.34X, as low as 1.99X and at the median of 2.74X.
EV-Sales Ratio TTM
3 Aerospace-Defense Stocks to Buy
GE Aerospace: Headquartered in Evendale, OH, GE Aerospace is a leading designer, developer and producer of jet engines, components and integrated systems for military, commercial and business aircraft. On Sept. 21, 2026, Kratos Defense and GE Aerospace successfully ignited the GEK800 turbofan propulsion system for a cruise missile at the X-58 test facility, achieving a 100% success rate in this critical development phase and keeping the program on schedule. On the aforementioned date, GE Aerospace announced a $225 million investment to modernize its Research Center in Niskayuna, NY, supported by $8.4 million in state tax credits and $5.3 million in local incentives, strengthening the facility’s role in developing next-generation aviation technologies.
The Zacks Consensus Estimate for GE’s 2026 sales calls for an increase of 19.5% year over year. The Zacks Consensus Estimate for 2026 earnings per share (EPS) indicates an improvement of 24.2% year over year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: GE
Howmet Aerospace: Headquartered in in Pittsburgh, PA, Howmet Aerospace provides engineered solutions for customers in the transportation and aerospace (both defense and commercial) industries. Howmet Aerospace reported a strong second-quarter 2026, with revenues rising 24% year over year to $2.55 billion and organic growth of 21%, while adjusted EPS jumped 46% to $1.33, reflecting strong demand across commercial aerospace, defense aerospace and gas turbines. Commercial aerospace revenues grew 28%, defense aerospace rose 11%, and gas turbines increased 38%, while Engine Products saw revenues rise 32%. HWM also generated $479 million in free cash flow, repurchased $300 million of shares and completed approximately $1.8 billion CAM acquisition during the quarter.
The Zacks Consensus Estimate for HWM’s 2026 sales calls for a 22.6% improvement year over year. The Zacks Consensus Estimate for 2026 EPS indicates an increase of 40.3% year over year. HWM currently has a Zacks Rank #2.
Price & Consensus: HWM
RTX: Based in Waltham, MA, RTX has emerged as an aerospace and defense company, providing advanced systems and services for commercial, military and government customers worldwide. On Sept. 28, 2026, RTX’s Raytheon unit announced plans to accelerate AMRAAM missile production to record levels under a five-year, multiyear contract, with two option years, valued at up to $20.7 billion. The contract was awarded as part of the Department of War’s Arsenal of Freedom. This provides Raytheon with significant multi-year demand and supports higher production volumes, strengthening RTX’s defense backlog and enabling further investment in manufacturing capacity, workforce and supply chain.
The Zacks Consensus Estimate for RTX’s 2026 sales calls for an increase of 8.4% year over year. The Zacks Consensus Estimate for 2026 EPS indicates a rise of 14.8% year over year. RTX currently has a Zacks Rank #2.
View the Zacks #1 Rank List
Image: Bigstock
3 Aerospace-Defense Stocks Poised for Growth on Defense Modernization
The Zacks Aerospace-Defense industry is benefiting from rising geopolitical tensions, higher military spending and continued air-travel demand, as governments accelerate defense modernization and invest in advanced weapons. Long-term defense procurement and lifecycle-support programs are also providing contractors with greater revenue visibility and earnings stability. Persistent supply-chain constraints, labor shortages, limited aircraft availability and higher operating costs remain key headwinds that continue to affect production, deliveries and airline profitability. The leading companies in the aerospace-defense industry that you might want to keep an eye on are GE Aerospace (GE - Free Report) , RTX Corporation (RTX - Free Report) and Howmet Aerospace (HWM - Free Report) .
About the Industry
The Zacks Aerospace-Defense industry comprises companies that primarily design and manufacture heavy-built products like commercial as well as military jets and helicopters, tankers and other combat vehicles, missiles, combatant ships as well as auxiliary ships, submarines, bombs, guns, space transportation vehicles, military satellites and a few more. The industry also includes cybersecurity players that offer information technology services and C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) solutions. A portion of its revenues comes from defense contractors offering spare parts, aircraft modification, ship repair and overhaul services, and supply-chain management services.
3 Major Trends in the Aerospace-Defense Industry
Geopolitical Tensions & Rising Military Modernization: Heightened geopolitical uncertainty is prompting governments worldwide to accelerate defense modernization and expand military expenditures. As defense priorities shift toward strengthening national security, contractors are increasingly securing long-term procurement programs that extend beyond initial equipment sales to include sustainment, modernization, training and lifecycle support. These multi-year programs provide greater revenue visibility, improve cash flow stability and support sustained earnings growth.
The U.S. defense industry is seeing stronger demand as the Pentagon and allied governments shift spending toward next-generation military capabilities, including advanced weapons, missile defense, unmanned and autonomous platforms, space systems, cyber technologies and modern aircraft. Recent conflicts have underscored the importance of maintaining adequate inventories of missiles and munitions, encouraging governments to accelerate procurement and expand domestic defense production. According to a Markets and Markets report, the Military Platforms market was estimated at $38.75 billion in 2025 and is expected to reach around $76.25 billion by 2032, registering a CAGR of about 10.2% during the period. Market growth is primarily driven by sustained defense modernization programs, replacement of aging land, naval, and air platforms, and continued investment in higher-capability military systems.
Air Traffic View Boosts Opportunities: According to a report by the International Air Transport Association (“IATA”), global air passenger demand is expected to grow 2.1% year over year in 2026. IATA reported that global passenger demand returned to growth in July 2026, with Revenue Passenger Kilometers (“RPK”) increasing 0.2% year over year, following contractions in May and June. Capacity rose 0.3%, while the global passenger load factor remained high at 85.2%, indicating resilient underlying air-travel demand despite elevated fuel costs, economic uncertainty and geopolitical tensions. Defense companies, especially those tied to aerospace manufacturing and technology, benefit through technological advances and improved production economics.
Supply-Chain Issues Continue to Act as a Headwind: The Aerospace and Defense industry continues to face supply-chain challenges that originated during the pandemic, when a sharp decline in aircraft demand led suppliers to reduce production capacity, scale back investments and shrink their workforces. Although demand has recovered strongly, many suppliers are still struggling to ramp up production, resulting in shortages of critical components, longer lead times, and delays in aircraft manufacturing and deliveries. According to IATA, airlines are facing higher operating costs because supply-chain problems have made spare parts more expensive and harder to obtain. Airport fees, air traffic charges and aircraft ownership costs have also increased. With new aircraft in short supply, airlines are leasing older, mid-life planes at higher rates. These older aircraft also consume more fuel, further increasing overall expenses. IATA has highlighted that limited aircraft availability and labor shortages remain key supply-side challenges, while broader disruptions continue to delay the timely production and delivery of essential systems.
Zacks Industry Rank Reflects Gloomy Outlook
The Zacks Aerospace-Defense industry is housed within the broader Zacks Aerospace sector. It currently carries a Zacks Industry Rank #179, which places it in the bottom 28% of more than 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is due to a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have lost confidence in this group’s earnings growth potential over the past few months. The industry’s bottom-line estimate for the current fiscal year has moved down 0.5% to $3.86 since July 31.
Before we present a few aerospace-defense stocks that you may want to add to your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Lags S&P 500 & Sector
The Aerospace-Defense industry has underperformed the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have collectively lost 14.3%, while the Zacks Aerospace sector has declined 12.3% during the same period. The Zacks S&P 500 composite has gained 16.9%.
One-Year Price Performance
Industry's Current Valuation
Based on trailing 12-month EV/Sales, a valuation metric commonly used for capital-intensive industries like aerospace and defense, the industry is currently trading at 2.61X compared with 5.69X for the S&P 500 and 2.88X for the sector.
Over the past five years, the industry has traded as high as 3.34X, as low as 1.99X and at the median of 2.74X.
EV-Sales Ratio TTM
3 Aerospace-Defense Stocks to Buy
GE Aerospace: Headquartered in Evendale, OH, GE Aerospace is a leading designer, developer and producer of jet engines, components and integrated systems for military, commercial and business aircraft. On Sept. 21, 2026, Kratos Defense and GE Aerospace successfully ignited the GEK800 turbofan propulsion system for a cruise missile at the X-58 test facility, achieving a 100% success rate in this critical development phase and keeping the program on schedule. On the aforementioned date, GE Aerospace announced a $225 million investment to modernize its Research Center in Niskayuna, NY, supported by $8.4 million in state tax credits and $5.3 million in local incentives, strengthening the facility’s role in developing next-generation aviation technologies.
The Zacks Consensus Estimate for GE’s 2026 sales calls for an increase of 19.5% year over year. The Zacks Consensus Estimate for 2026 earnings per share (EPS) indicates an improvement of 24.2% year over year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: GE
Howmet Aerospace: Headquartered in in Pittsburgh, PA, Howmet Aerospace provides engineered solutions for customers in the transportation and aerospace (both defense and commercial) industries. Howmet Aerospace reported a strong second-quarter 2026, with revenues rising 24% year over year to $2.55 billion and organic growth of 21%, while adjusted EPS jumped 46% to $1.33, reflecting strong demand across commercial aerospace, defense aerospace and gas turbines. Commercial aerospace revenues grew 28%, defense aerospace rose 11%, and gas turbines increased 38%, while Engine Products saw revenues rise 32%. HWM also generated $479 million in free cash flow, repurchased $300 million of shares and completed approximately $1.8 billion CAM acquisition during the quarter.
The Zacks Consensus Estimate for HWM’s 2026 sales calls for a 22.6% improvement year over year. The Zacks Consensus Estimate for 2026 EPS indicates an increase of 40.3% year over year. HWM currently has a Zacks Rank #2.
Price & Consensus: HWM
RTX: Based in Waltham, MA, RTX has emerged as an aerospace and defense company, providing advanced systems and services for commercial, military and government customers worldwide. On Sept. 28, 2026, RTX’s Raytheon unit announced plans to accelerate AMRAAM missile production to record levels under a five-year, multiyear contract, with two option years, valued at up to $20.7 billion. The contract was awarded as part of the Department of War’s Arsenal of Freedom. This provides Raytheon with significant multi-year demand and supports higher production volumes, strengthening RTX’s defense backlog and enabling further investment in manufacturing capacity, workforce and supply chain.
The Zacks Consensus Estimate for RTX’s 2026 sales calls for an increase of 8.4% year over year. The Zacks Consensus Estimate for 2026 EPS indicates a rise of 14.8% year over year. RTX currently has a Zacks Rank #2.
Price & Consensus: RTX