The defense sector typically sees strong demand for its products and services as the U.S. and other countries continue to upgrade and improve equipment and systems to keep their nations secure. In the current geopolitical climate, demand for the output of defense companies is likely to increase even more, as nations support their allies with materiel.
Many defense stocks recently reported their earnings for the third quarter of 2023, and several have exceeded estimates. Here are some of the best defense stocks to buy now.
What Are the Best Defense Stocks To Buy?
If you’re looking to add defense sector stocks to your portfolio, these are good options to consider now:
- Boeing Co. (BA)
- Lockheed Martin Corp. (LMT)
- General Dynamics Corp. (GD)
- RTX Corp. (RTX)
- Northrop Grumman Corp. (NOC)
- CACI International Inc. (CACI)
1. Boeing Co. (BA)
Boeing Co. develops, manufactures and services commercial and military aircraft, defense products and space systems. The company has customers in over 150 countries and is a top exporter in the United States. Boeing Co. employs over 150,000 people in the U.S. If you’ve flown commercially in the last few decades, you’ve probably flown in a Boeing plane, as the company manufactures the 737, 747, 767, 777 and 787 families of aircraft, among others, and Boeing jetliners comprise almost half the world fleet of commercial jets.
On Oct. 25, Boeing reported its Q3 results, which included revenue of $18.1 billion, and a GAAP loss of $2.70 per share. The company reaffirmed its full-year guidance of $4.5 billion to $6.5 billion of operating cash flow and $3 billion to $5 billion of free cash flow. The company expects to deliver between 375 and 400 of its 737 Max narrowbody jets this year, down from its earlier projection of 400 to 450 aircraft. Production was impacted by a supplier issue.
2. Lockheed Martin Corp. (LMT)
Lockheed Martin Corp. is a security and aerospace company that produces fixed-wing and rotary-wing commercial and military aircraft, autonomous products, air and missile defense products, radar and more. The company employs 116,000 people in over 375 facilities worldwide. Twenty percent of Lockheed Martin employees are veterans.
Lockheed Martin reported Q3 earnings on Oct. 17. The company had net sales of $16.9 billion, up 2% over its $16.6 billion in sales in the same quarter last year. Net earnings were $1.7 billion, or $6.73 per share. Lockheed Martin returned $2.5 billion of cash to shareholders in dividends and stock buybacks and increased its share repurchase authority by $6 billion for a total of $13 billion. The quarterly dividend was increased to $3.15 per share.
3. General Dynamics Corp. (GD)
General Dynamics Corp. is a global defense and aerospace company that provides products and services in business aviation, ship construction and repair, weapons systems, technology products and services, and more. The company employs over 100,000 people around the world.
General Dynamics Corp. reported revenue of $10.6 billion in the third quarter of 2023, up 6% over the same period last year. Net earnings were $836 million, and diluted earnings per share were $3.04. The company reported a backlog of $95.6 billion, the company’s highest ever, and a book-to-bill ratio of 1.4 to 1, meaning it booked $1.4 in new orders for every $1 of revenue in the third quarter.
4. RTX Corp. (RTX)
RTX Corp. is the aerospace and defense conglomerate that was formed when Raytheon Co. merged with United Technologies Corp. in 2020. The company now operates three divisions: Collins Aerospace, Pratt & Whitney and Raytheon. It officially changed its name to RTX Corp. in July 2023.
RTX Corp. reported its Q3 earnings on Oct. 24, and they were better than expected. Overall adjusted profit for the quarter was $1.25 per share, better than the analysts’ expectations of $1.21. Adjusted revenue was up 12% to $18.95 billion, again beating the expectation of $18.59 billion. The company announced a $10 billion share repurchase program and increased its 2023 outlook to sales of $695 billion, free cash flow of $4.8 billion and earnings per share of $4.9 to $5.02.
5. Northrop Grumman Corp. (NOC)
Northrop Grumman Corp. builds advanced aircraft like the B-2 Spirit stealth bomber; provides full-spectrum cyber to secure military communications; provides logistics, sustainment and modernization services to emergency services and the military; designs, develops and produces naval systems; is a pioneer in space exploration; and more. The company employs 100,000 people and operates in all 50 states and around the world.
In its Q3 2023 quarterly results, reported Oct. 26, Northrop Grumman reported $9.8 billion in sales in the third quarter of 2023, an increase of 9%. Operating income rose 20%. Diluted EPS for the quarter was at $6.18, and the company reported operating cash flow of $1.2 billion. Its 2023 guidance was increased to $39 billion.
6. CACI International Inc. (CACI)
CACI International Inc. provides technology and expertise to U.S. government customers for national security. The company’s business units comprise Cyber and Space, Digital Solutions, Engineering Services, Enterprise IT, and Mission Support. CACI International employs 23,000 people and is headquartered in Reston, Virginia.
CACI International reported its first fiscal quarter 2024 results on Oct. 25, announcing revenues of $1.9 billion, up 15.2% from the same period a year earlier. Net income was $86 million and earnings per share were $3.76. The company reported contract awards of $3.1 billion in the quarter and a book-to-bill ratio of 1.7 to 1. The company raised its fiscal year 2024 guidance to revenues of $7.2 billion to $7.4 billion, adjusted net income of $440 million to $465 million, and adjusted diluted EPS of $19.38 to $20.48.
If you want to invest in defense stocks but don’t want to choose a single company to buy, you can buy an exchange-traded fund that will mimic the return of the defense sector overall. Here are two to consider.
Invesco Aerospace & Defense ETF (PPA)
Invesco Aerospace & Defense ETF is an exchange-traded fund with nearly 90% of its $1.92 billion in holdings in industrials and just under 10% in technology. Its top five holdings, in order, are Northrop Grumman Corp., RTX Corp., Lockheed Martin Corp., Boeing Co. and General Electric Co. Each of these stocks makes up 5% or more of the ETF.
SPDR S&P Aerospace & Defense ETF (XAR)
SPDR S&P Aerospace & Defense ETF is 100% invested in industrial stocks and has $1.4 billion in net assets. Its top five positions, none of which represents more than 5% of total positions, are Northrop Grumman Corp., BWX Technologies Inc., L3Harris Technologies Inc., Textron Inc. and General Dynamics Corp.
Information is accurate as of Oct. 26, 2023.
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- Boeing. 2023. "Boeing Reports Third Quarter Results."
- Yahoo Finance. 2023. "Boeing earnings: Aerospace giant trims 737 Max forecast due to production issue; maintains cash flow guidance."
- Lockheed Martin. 2023. "Lockheed Martin Reports Third Quarter 2023 Financial Results."
- General Dynamics. 2023. "General Dynamics Reports Third-Quarter 2023 Financial Results."
- Reuters. 2023. "RTX beats Q3 estimates, approves $10 bln share repurchase."
- GuruFocus. 2023. "Northrop Grumman Corp (NOC) Reports Q3 2023 Earnings: Sales Rise 9% to $9.8 Billion."
- GuruFocus. 2023. "CACI International Inc (CACI) Reports Fiscal 2024 First Quarter Results."