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4 Defense Stocks Poised to Beat Expectations This Earnings Season
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The Zacks Aerospace sector’s third-quarter 2026 earnings are expected to outperform estimates due to rising global defense spending, geopolitical tensions and military modernization programs, driving demand for advanced defense systems and technologies. Strong order backlogs provide revenue visibility, while increasing investments in AI, autonomous systems, hypersonic weapons, electronic warfare and counter-drone technologies create additional growth opportunities. Per the latest Earnings Preview, the sector’s quarterly earnings are expected to rise 186.2% on 13.1% higher revenues.
With the assistance of the Zacks Stock Screener, we have identified four defense stocks, namely Kratos Defense & Security Solutions (KTOS - Free Report) , Heico (HEI - Free Report) , Curtiss-Wright (CW - Free Report) and AeroVironment (AVAV - Free Report) , which are poised to beat on earnings this reporting cycle.
These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to surpass expectations. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Factors That are Likely to Influence Defense Stocks’ Q3 Results
Geopolitical tensions and increasing military modernization requirements are encouraging governments to strengthen defense capabilities. Higher defense budgets are supporting demand for fighter jets, missiles, missile-defense systems, naval platforms, radars, drones and advanced military technologies. This is creating opportunities for defense contractors to secure new contracts and expand existing programs.
Aerospace and defense companies continue to benefit from substantial order backlogs, providing revenue visibility over the coming quarters and years. Companies with strong backlogs and consistent contract execution are better positioned to sustain revenue growth.
Rising investments in artificial intelligence, autonomous systems, hypersonic weapons, electronic warfare, space-based surveillance and counter-drone technologies are creating new growth opportunities. Governments are increasingly prioritizing next-generation warfare capabilities, benefiting companies that develop advanced military systems, sensors, communication networks and unmanned platforms.
Shortages of critical components, raw materials, semiconductors and specialized aerospace parts continue to affect manufacturing schedules. Dependence on a limited number of suppliers can delay aircraft deliveries and defense program execution, affecting revenue recognition and profitability.
A shortage of skilled workers could restrict production capacity. Higher labor costs, wage inflation, training expenses and employee retention challenges may increase operating expenses and put pressure on margins.
Defense Stocks Poised to Outperform
Kratos Defense offers high-performance, jet-powered unmanned aerial target drone systems designed to simulate advanced adversarial fighter aircraft, missiles and other emerging threats. Kratos Defense’s expansion of its York and Oklahoma City facilities is expected to boost manufacturing capacity for advanced military hardware and jet-powered drones, supporting higher deliveries amid rising defense demand in the to-be-reported quarter. Strong third-quarter revenue guidance, growing hypersonics sales, and a healthy order backlog further strengthen its growth outlook and revenue visibility.
The Zacks Consensus Estimate for third-quarter earnings is pegged at 21 cents per share, indicating an increase of 50% from the year-ago reported figure. KTOS currently has an Earnings ESP of +8.78% and a Zacks Rank of 1. You can see the complete list of today's Zacks #1 Rank stocks here.
Kratos Defense & Security Solutions, Inc. Price and EPS Surprise
Heico is one of the world’s leading manufacturers of Federal Aviation Administration (“FAA”)-approved jet engine and aircraft component replacement parts. It also manufactures various types of electronic equipment for the aviation, defense, space, medical, telecommunications and electronics industries. HEICO's upcoming-quarter growth prospects remain favorable, supported by resilient aerospace aftermarket demand, increasing defense and space-related business, a substantial backlog and acquisition contributions. HEICO expects increased net sales at both the Flight Support Group and Electronic Technologies Group during the remainder of fiscal 2026, supported by underlying customer demand and contributions from recent acquisitions.
The Zacks Consensus Estimate for fiscal fourth-quarter 2026 earnings is pegged at $1.62 per share, indicating an improvement of 21.8% from the year-ago quarter’s reported figure. HEI currently has an Earnings ESP of +1.71% and a Zacks Rank of 2.
Curtiss-Wright provides highly engineered products and services for high-performance platforms, and critical applications in key areas such as commercial aerospace and defense electronics, reactor coolant pumps for next-generation nuclear reactors as well as advanced surface treatment technologies. The company is likely to have benefited from higher defense procurement spending by the United States and its allied nations, with increased demand for naval and land-based military systems. Strong contract wins and sustained order inflows are also expected to have strengthened its revenue pipeline and improved business visibility.
The Zacks Consensus Estimate for third-quarter earnings is pegged at $3.76 per share, indicating an improvement of 10.6% from the year-ago quarter’s reported figure. CW currently has an Earnings ESP of +0.23% and a Zacks Rank of 3.
AeroVironment designs, develops, produces and operates a portfolio of products and services for government agencies, businesses and consumers. It supplies UAS, tactical missile systems and related services primarily to organizations within the United States Department of Defense. It also supplies charging systems and services for electric vehicles, and power cycling and test systems to commercial, consumer and government customers. AeroVironment's quarterly earnings are supported by strong defense demand, expanding contract wins, a record funded backlog and increasing opportunities in autonomous systems and counter-drone technologies.
The Zacks Consensus Estimate for fiscal second-quarter 2027 earnings is pegged at 46 cents per share, indicating an increase of 4.6% from the year-ago reported figure. AVAV currently has an Earnings ESP of +121.05% and a Zacks Rank of 3.
View the Zacks #1 Rank List
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4 Defense Stocks Poised to Beat Expectations This Earnings Season
The Zacks Aerospace sector’s third-quarter 2026 earnings are expected to outperform estimates due to rising global defense spending, geopolitical tensions and military modernization programs, driving demand for advanced defense systems and technologies. Strong order backlogs provide revenue visibility, while increasing investments in AI, autonomous systems, hypersonic weapons, electronic warfare and counter-drone technologies create additional growth opportunities. Per the latest Earnings Preview, the sector’s quarterly earnings are expected to rise 186.2% on 13.1% higher revenues.
With the assistance of the Zacks Stock Screener, we have identified four defense stocks, namely Kratos Defense & Security Solutions (KTOS - Free Report) , Heico (HEI - Free Report) , Curtiss-Wright (CW - Free Report) and AeroVironment (AVAV - Free Report) , which are poised to beat on earnings this reporting cycle.
These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to surpass expectations. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Factors That are Likely to Influence Defense Stocks’ Q3 Results
Geopolitical tensions and increasing military modernization requirements are encouraging governments to strengthen defense capabilities. Higher defense budgets are supporting demand for fighter jets, missiles, missile-defense systems, naval platforms, radars, drones and advanced military technologies. This is creating opportunities for defense contractors to secure new contracts and expand existing programs.
Aerospace and defense companies continue to benefit from substantial order backlogs, providing revenue visibility over the coming quarters and years. Companies with strong backlogs and consistent contract execution are better positioned to sustain revenue growth.
Rising investments in artificial intelligence, autonomous systems, hypersonic weapons, electronic warfare, space-based surveillance and counter-drone technologies are creating new growth opportunities. Governments are increasingly prioritizing next-generation warfare capabilities, benefiting companies that develop advanced military systems, sensors, communication networks and unmanned platforms.
Shortages of critical components, raw materials, semiconductors and specialized aerospace parts continue to affect manufacturing schedules. Dependence on a limited number of suppliers can delay aircraft deliveries and defense program execution, affecting revenue recognition and profitability.
A shortage of skilled workers could restrict production capacity. Higher labor costs, wage inflation, training expenses and employee retention challenges may increase operating expenses and put pressure on margins.
Defense Stocks Poised to Outperform
Kratos Defense offers high-performance, jet-powered unmanned aerial target drone systems designed to simulate advanced adversarial fighter aircraft, missiles and other emerging threats. Kratos Defense’s expansion of its York and Oklahoma City facilities is expected to boost manufacturing capacity for advanced military hardware and jet-powered drones, supporting higher deliveries amid rising defense demand in the to-be-reported quarter. Strong third-quarter revenue guidance, growing hypersonics sales, and a healthy order backlog further strengthen its growth outlook and revenue visibility.
The Zacks Consensus Estimate for third-quarter earnings is pegged at 21 cents per share, indicating an increase of 50% from the year-ago reported figure. KTOS currently has an Earnings ESP of +8.78% and a Zacks Rank of 1. You can see the complete list of today's Zacks #1 Rank stocks here.
Kratos Defense & Security Solutions, Inc. Price and EPS Surprise
Kratos Defense & Security Solutions, Inc. price-eps-surprise | Kratos Defense & Security Solutions, Inc. Quote
Heico is one of the world’s leading manufacturers of Federal Aviation Administration (“FAA”)-approved jet engine and aircraft component replacement parts. It also manufactures various types of electronic equipment for the aviation, defense, space, medical, telecommunications and electronics industries. HEICO's upcoming-quarter growth prospects remain favorable, supported by resilient aerospace aftermarket demand, increasing defense and space-related business, a substantial backlog and acquisition contributions. HEICO expects increased net sales at both the Flight Support Group and Electronic Technologies Group during the remainder of fiscal 2026, supported by underlying customer demand and contributions from recent acquisitions.
The Zacks Consensus Estimate for fiscal fourth-quarter 2026 earnings is pegged at $1.62 per share, indicating an improvement of 21.8% from the year-ago quarter’s reported figure. HEI currently has an Earnings ESP of +1.71% and a Zacks Rank of 2.
Heico Corporation Price and EPS Surprise
Heico Corporation price-eps-surprise | Heico Corporation Quote
Curtiss-Wright provides highly engineered products and services for high-performance platforms, and critical applications in key areas such as commercial aerospace and defense electronics, reactor coolant pumps for next-generation nuclear reactors as well as advanced surface treatment technologies. The company is likely to have benefited from higher defense procurement spending by the United States and its allied nations, with increased demand for naval and land-based military systems. Strong contract wins and sustained order inflows are also expected to have strengthened its revenue pipeline and improved business visibility.
The Zacks Consensus Estimate for third-quarter earnings is pegged at $3.76 per share, indicating an improvement of 10.6% from the year-ago quarter’s reported figure. CW currently has an Earnings ESP of +0.23% and a Zacks Rank of 3.
Curtiss-Wright Corporation Price and EPS Surprise
Curtiss-Wright Corporation price-eps-surprise | Curtiss-Wright Corporation Quote
AeroVironment designs, develops, produces and operates a portfolio of products and services for government agencies, businesses and consumers. It supplies UAS, tactical missile systems and related services primarily to organizations within the United States Department of Defense. It also supplies charging systems and services for electric vehicles, and power cycling and test systems to commercial, consumer and government customers. AeroVironment's quarterly earnings are supported by strong defense demand, expanding contract wins, a record funded backlog and increasing opportunities in autonomous systems and counter-drone technologies.
The Zacks Consensus Estimate for fiscal second-quarter 2027 earnings is pegged at 46 cents per share, indicating an increase of 4.6% from the year-ago reported figure. AVAV currently has an Earnings ESP of +121.05% and a Zacks Rank of 3.
AeroVironment, Inc. Price and EPS Surprise
AeroVironment, Inc. price-eps-surprise | AeroVironment, Inc. Quote