The defense equipment industry remains resilient, supported by rising defense spending and strategic mergers and acquisitions that improve operational scale, diversify product offerings and increase market presence, even as supply-chain challenges persist. 

The proposed increase in the U.S. defense budget to $1.5 trillion in 2027, signals long-term support for defense-related companies. The Zacks-defined Defense Equipment industry is currently in the top 29% of the Zacks Industry Rank. Since the Defense Equipment industry is ranked in the top half of the Zacks Ranked Industries, we expect it to outperform the market over the next three to six months.

At this stage, we have narrowed our search to three defense equipment stocks with a favorable Zacks Rank that are currently trading at lucrative discounts. The ongoing war in the Middle East between Iran and the U.S.-Israel joint force may act as a catalyst for these companies in the near-term. 

These companies are: BWX Technologies Inc. (BWXT Quick QuoteBWXT - Free Report) , Woodward Inc. (WWD Quick QuoteWWD - Free Report) and TransDigm Group Inc. (TDG Quick QuoteTDG - Free Report) . Each currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our three picks in the past month. 

Image Source: Zacks Investment Research

BWX Technologies

Zacks Rank #1 BWX Technologies manufactures and sells nuclear components in the United States, Canada, and internationally. BWXT operates through two segments — Government Operations and Commercial Operations.

BWXT is benefiting from strong bookings, government contracts, and growing nuclear demand, particularly in government operations and commercial power. New contract wins, particularly large-scale naval nuclear reactor agreements, were the key contributors to the strong second quarter results.

At the end of 2025, the total backlog reached $7.3 billion, up 50% year over year. Management credited robust federal demand and a growing pipeline in both government and commercial operations, including large new projects in the United States and Canada.

BWXT supplies precision-manufactured components and services to the commercial nuclear power industry. BWXT offers technical, management and site services to governments in complex facilities and environmental remediation activities.

BWXT is expanding its commercial power segment and gaining ground at the cutting edge of small modular and micro nuclear reactors. BWXT is working alongside the U.S. government and other cutting-edge nuclear energy companies.

BWXT has landed deals and partnerships with the U.S. Department of Defense to help build a cutting-edge micro-nuclear reactor. The Kinectrics acquisition and new regulatory approvals for isotope production are the other positives.

Higher manufacturing volume of nuclear components for U.S. government programs, along with growth in design and engineering work executed by BWXT’s advanced technologies business, particularly in the defense market, is likely to bolster its top line in the future.  

BWX Technologies has an expected revenue and earnings growth rate of 17.3% and 11.5%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 4.9% over the past 30 days. BWXT is currently trading at 8% discount from its 52-week high.

Woodward 

Zacks Rank #1 Woodward is gaining from strength in the Aerospace segment and Core Industrial (transportation, power generation and oil & gas markets) units, which continued in the first quarter of fiscal 2026. WWD’s Aerospace business benefited from strength across commercial services and defense OEM in the first quarter. 

For fiscal 2026, WWD expects consolidated net sales to rise 14% to 18%, with Aerospace projected to grow 15% to 20% and Industrial anticipated to increase 11% to 14%. Technology upgrades and disciplined capital allocation support WWD’s long-term growth. WWD expects to return between $650 million and $700 million in fiscal 2026 to shareholders via dividends and share repurchases. 

Woodward has an expected revenue and earnings growth rate of 16% and 23.5%, respectively, for the current fiscal year (ending September 2026). The Zacks Consensus Estimate for the current fiscal-year earnings has improved 2.4% over the past 30 days. WWD is currently trading at 8.9% discount from its 52-week high.

TransDigm Group 

Zacks Rank #2 TransDigm Group being an equipment supplier of renowned military jet makers, should benefit from solid funding provisions from the U.S. government. In January 2026, President Donald Trump proposed a significant increase in defense spending, targeting annual military outlays of about $1.5 trillion by 2027, up sharply from the roughly $901 billion defense budget approved for fiscal 2026, subject to congressional approval. 

This enhanced funding provision thus boosts the possibility for renowned military jet builders like Boeing and others to acquire significant defense contracts from the Pentagon, which, in turn, should benefit equipment suppliers like TDG.

Thanks to the steadily rising air traffic trend worldwide, the commercial aircraft industry is once again thriving, which has benefited TDG. In the first quarter of fiscal 2026, TDG continued to witness robust commercial air traffic demand, with both domestic and international revenue passenger kilometers reflecting strong growth trends.

TransDigm Group has an expected revenue and earnings growth rate of 13.8% and 5.7%, respectively, for the current fiscal year (ending September 2026). The Zacks Consensus Estimate for the current-fiscal year earnings has improved 1.9% over the past 60 days. TDG is currently trading at 23.2% discount from its 52-week high.