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3 Defense Stocks to Watch as War Drags On, Spending Set to Surge
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Key Takeaways
RTX ended 2025 with a defense backlog of about $107 billion, reflecting strong Pentagon and allied demand.
Lockheed Martin closed 2025 with a $193.6 billion backlog, led by the F-35 and rising missile output.
Boeing booked about $15 billion in defense orders in Q4 2025, lifting backlog to roughly $85 billion.
The conflict in the Middle East is in its fourth week and continues to evolve. While recent reports suggest that the United States has sent Iran a 15-point proposal aimed at ending the war, the signals remain mixed. Iran has denied direct talks, and developments on the ground point to continued caution. The Pentagon has ordered the deployment of troops from the 82nd Airborne Division to the region, even as diplomatic efforts appear to be underway.
This mix of de-escalation talk and military buildup only shows that even if negotiations move forward, governments are not dialing back their defense plans. If anything, the current environment is reinforcing the need to stay prepared for any outcome.
The policy backdrop reinforces that view. The Trump administration is expected to release its partial fiscal 2027 budget next week, and earlier indications point to a sharp increase in defense spending. In January, Trump had proposed a $1.5 trillion budget that would mark a significant jump from current levels, reflecting a more uncertain global environment.
These point to a broader shift. Defense spending is no longer just a reaction to specific conflicts but part of a more sustained push toward preparedness and modernization.
In this context, large defense contractors like RTX Corporation (RTX - Free Report) , Lockheed Martin (LMT - Free Report) and Boeing (BA - Free Report) remain key players to watch.
RTX
The company continues to benefit from strong demand for its defense systems, supported by a wide portfolio of combat-proven technologies. RTX secured several notable contracts in the last reported quarter, driving solid bookings and pushing its total backlog to record levels. Its defense backlog was around $107 billion at the end of 2025, reflecting sustained demand from the Pentagon and allied nations.
RTX’s strength lies in its balanced business model. While its Raytheon segment is known for key missile systems like Patriot, Tomahawk and AMRAAM, its Collins Aerospace and Pratt & Whitney units serve both commercial and government markets, providing an additional layer of stability.
RTX expects to generate strong free cash flow, which it plans to use to fund operations, invest in growth and return capital to shareholders. This combination of steady demand, diversified operations and solid cash generation positions the company well in the current environment.
Lockheed continues to benefit from steady contract wins, supported by its strong positioning across major U.S. defense programs. The company secured several notable deals in the fourth quarter, driving its backlog to a solid $193.6 billion at the end of 2025. This large order book provides good revenue visibility and reflects sustained demand from the Pentagon and allied nations.
Lockheed’s strength lies in its platform-centric model, with deep involvement across the Army, Air Force and Navy. Its flagship F-35 program remains a key growth driver, supporting long-term demand through production as well as follow-on maintenance and upgrades.
At the same time, the company is ramping up missile production. It is expanding the output of systems like THAAD and PAC-3, while investing in new facilities to accelerate munitions manufacturing. These efforts, along with steps to strengthen supply chains, position Lockheed well in a rising defense spending environment.
Lockheed stock currently carries a Zacks Rank #3 (Hold). The consensus mark for the company’s 2026 EPS has moved 12 cents north to $28.93 in the past 30 days, implying an uptick of 30% from 2025 levels.
Lockheed Martin Corporation Price, Consensus and EPS Surprise
Boeing remains a key player across both commercial aerospace and defense, giving it a diversified revenue base. While the company continues to benefit from steady demand and improving deliveries in its commercial aircraft business, its defense segment also provides important support.
Boeing’s Defense, Space & Security unit has been seeing solid order activity. In the fourth quarter of 2025, the segment booked around $15 billion in orders, including deals for KC-46A tankers and Apache helicopters. This helped push its backlog to about $85 billion at the end of 2025, providing good visibility for future revenues.
The defense business has also shown strong momentum, with revenues rising sharply in the last reported quarter. Backed by a broad military portfolio and steady funding for programs like fighter jets and space systems, Boeing remains well-positioned to benefit from sustained defense spending, even as it continues to stabilize its commercial operations.
BA stock currently carries a Zacks Rank of 3. The consensus mark for the company’s 2026 and 2027 EPS implies a year-over-year jump of 104% and 855%, respectively.
The Boeing Company Price, Consensus and EPS Surprise
View the Zacks #1 Rank List
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3 Defense Stocks to Watch as War Drags On, Spending Set to Surge
Key Takeaways
The conflict in the Middle East is in its fourth week and continues to evolve. While recent reports suggest that the United States has sent Iran a 15-point proposal aimed at ending the war, the signals remain mixed. Iran has denied direct talks, and developments on the ground point to continued caution. The Pentagon has ordered the deployment of troops from the 82nd Airborne Division to the region, even as diplomatic efforts appear to be underway.
This mix of de-escalation talk and military buildup only shows that even if negotiations move forward, governments are not dialing back their defense plans. If anything, the current environment is reinforcing the need to stay prepared for any outcome.
The policy backdrop reinforces that view. The Trump administration is expected to release its partial fiscal 2027 budget next week, and earlier indications point to a sharp increase in defense spending. In January, Trump had proposed a $1.5 trillion budget that would mark a significant jump from current levels, reflecting a more uncertain global environment.
These point to a broader shift. Defense spending is no longer just a reaction to specific conflicts but part of a more sustained push toward preparedness and modernization.
In this context, large defense contractors like RTX Corporation (RTX - Free Report) , Lockheed Martin (LMT - Free Report) and Boeing (BA - Free Report) remain key players to watch.
RTX
The company continues to benefit from strong demand for its defense systems, supported by a wide portfolio of combat-proven technologies. RTX secured several notable contracts in the last reported quarter, driving solid bookings and pushing its total backlog to record levels. Its defense backlog was around $107 billion at the end of 2025, reflecting sustained demand from the Pentagon and allied nations.
RTX’s strength lies in its balanced business model. While its Raytheon segment is known for key missile systems like Patriot, Tomahawk and AMRAAM, its Collins Aerospace and Pratt & Whitney units serve both commercial and government markets, providing an additional layer of stability.
RTX expects to generate strong free cash flow, which it plans to use to fund operations, invest in growth and return capital to shareholders. This combination of steady demand, diversified operations and solid cash generation positions the company well in the current environment.
RTX stock currently carries a Zacks Rank #2 (Buy). The consensus mark for the company’s 2026 and 2027 EPS has moved north by 15 cents and 18 cents, respectively, over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
RTX Corporation Price, Consensus and EPS Surprise
RTX Corporation price-consensus-eps-surprise-chart | RTX Corporation Quote
Lockheed
Lockheed continues to benefit from steady contract wins, supported by its strong positioning across major U.S. defense programs. The company secured several notable deals in the fourth quarter, driving its backlog to a solid $193.6 billion at the end of 2025. This large order book provides good revenue visibility and reflects sustained demand from the Pentagon and allied nations.
Lockheed’s strength lies in its platform-centric model, with deep involvement across the Army, Air Force and Navy. Its flagship F-35 program remains a key growth driver, supporting long-term demand through production as well as follow-on maintenance and upgrades.
At the same time, the company is ramping up missile production. It is expanding the output of systems like THAAD and PAC-3, while investing in new facilities to accelerate munitions manufacturing. These efforts, along with steps to strengthen supply chains, position Lockheed well in a rising defense spending environment.
Lockheed stock currently carries a Zacks Rank #3 (Hold). The consensus mark for the company’s 2026 EPS has moved 12 cents north to $28.93 in the past 30 days, implying an uptick of 30% from 2025 levels.
Lockheed Martin Corporation Price, Consensus and EPS Surprise
Lockheed Martin Corporation price-consensus-eps-surprise-chart | Lockheed Martin Corporation Quote
Boeing
Boeing remains a key player across both commercial aerospace and defense, giving it a diversified revenue base. While the company continues to benefit from steady demand and improving deliveries in its commercial aircraft business, its defense segment also provides important support.
Boeing’s Defense, Space & Security unit has been seeing solid order activity. In the fourth quarter of 2025, the segment booked around $15 billion in orders, including deals for KC-46A tankers and Apache helicopters. This helped push its backlog to about $85 billion at the end of 2025, providing good visibility for future revenues.
The defense business has also shown strong momentum, with revenues rising sharply in the last reported quarter. Backed by a broad military portfolio and steady funding for programs like fighter jets and space systems, Boeing remains well-positioned to benefit from sustained defense spending, even as it continues to stabilize its commercial operations.
BA stock currently carries a Zacks Rank of 3. The consensus mark for the company’s 2026 and 2027 EPS implies a year-over-year jump of 104% and 855%, respectively.
The Boeing Company Price, Consensus and EPS Surprise
The Boeing Company price-consensus-eps-surprise-chart | The Boeing Company Quote