The aerospace and defense industry is poised for growth, driven by technological advancements and rising demand for commercial air travel. Therefore, investors could consider buying RTX Corporation (RTX), Lockheed Martin Corporation (LMT), and Northrop Grumman Corporation (NOC).
The U.S. aerospace and defense sector continues to demonstrate robust advancement through technological innovation and manufacturing excellence across its extensive infrastructure network. Therefore, the U.S. aerospace and defense market is expected to grow at a CAGR of 5.8% by 2030.
Moreover, AI in the aerospace and defense market is growing due to its utilization to accelerate the speed in terms of concept and detailed design phases and enhance the surveillance, security, and training in the defense sector. The global AI in aerospace and defense market is expected to grow at a CAGR of 9.9% by 2034.
Here are three Air/Defense Services stocks poised to deliver strong growth in the years ahead, starting with number 3.
Stock #3: RTX Corporation (RTX)
RTX is an aerospace and defense company that provides systems and services for commercial, military, and government customers internationally. It operates through three segments: Collins Aerospace; Pratt & Whitney; and Raytheon.
On January 3, 2025, RTX announced a $946 million contract to provide Romania with more Patriot air and missile defense systems, including radars, control stations, and missiles. This is Romania’s third Patriot order, highlighting its dedication to strengthening collective security and stability in Europe.
On December 5, 2024, RTX secured a $590 million contract with the U.S. Navy to produce the Next Generation Jammer Mid-Band (NGJ-MB) system. Designed for EA-18G Growlers, this advanced electronic warfare system targets modern radar threats, boosting combat capabilities for the U.S. Navy and the Royal Australian Air Force.
In terms of the trailing-12-month levered FCF margin, RTX’s 10.21% is 47.5% higher than the 6.92% industry average. Likewise, its 2.99% trailing-12-month CAPEX/Sales is 5.7% higher than the 2.82% industry average. Its 15.90% trailing-12-month EBITDA margin is 12.4% higher than the 14.15% industry average.
RTX’s sales for the third quarter ended September 30, 2024, increased 6% year-over-year to $20.09 billion. Its adjusted net income attributable to common shareholders rose 6.9% year-over-year to $1.95 billion, while its EPS increased 16% year-over-year to $1.45. In addition, the company’s free cash flow was $1.97 billion.
Analysts expect RTX’s EPS and revenue for the fourth quarter ended December 31, 2024, to increase 6.6% and 3% year-over-year to $1.38 and $20.52 billion, respectively. It surpassed Street revenue and EPS estimates in each of the trailing four quarters. RTX’s stock has gained 40% over the past year to close the last trading session at $125.31.
RTX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It is ranked #7 in the 70-stock Air/Defense Services industry. It has an A grade for Momentum and a B for Sentiment and Growth. In addition to the POWR Ratings grades I’ve just highlighted, you can see RTX’s ratings for Value, Stability, and Quality here.
Stock #2: Lockheed Martin Corporation (LMT)
LMT is a security and aerospace company that engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. The company operates through Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space segments.
On December 16, 2024, LMT launched the GPS III SV07 satellite into orbit, accelerating the Space Force’s GPS modernization efforts. The satellite, featuring advanced anti-jamming M-code technology, enhances secure navigation and positioning for military and global applications.
On the same date, LMT announced the launch of Astris AI, a subsidiary focused on providing secure, scalable AI solutions for defense and commercial sectors. Astris AI leverages LMT’s AI expertise to deliver high-assurance AI platforms and consulting services for regulated industries.
In terms of the trailing-12-month net income margin, LMT’s 9.36% is 43.7% higher than the 6.52% industry average. Likewise, its 21.08% trailing-12-month Return on Total Capital is 198% higher than the industry average of 7.07%. Also, LMT’s 1.27x trailing-12-month asset turnover ratio is 62.7% higher than the industry average of 0.78x.
In the fiscal third quarter that ended on September 29, 2024, LMT’s net sales increased 1.3% year-over-year to $17.10 billion. Its gross profit rose 3.4% from the prior-year value to $2.12 billion. Moreover, its operating profit and EPS were $2.14 billion and $6.80, up 4.8% and slightly, respectively, from the previous year’s quarter.
For the quarter ending March 31, 2025, LMT’s revenue is expected to increase 2.7% year-over-year to $17.67 billion. Its EPS for the same quarter is expected to rise 2.5% year-over-year to 6.49. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 8.2% to close the last trading session at $496.96.
LMT has an overall B rating, equating to a Buy in our proprietary rating system. LMT has an A grade for Momentum and a B for Value and Quality. It is ranked #4 in the same industry. To see LMT’s Growth, Stability, and Sentiment rating, click here.
Stock #1: Northrop Grumman Corporation (NOC)
NOC is a leading aerospace and defense company offering unmanned aircraft, missile defense, ISR systems, and space technologies. Its services cater to military and government clients globally across aeronautics, defense, mission, and space sectors.
NOC’s trailing-12-month asset turnover ratio of 0.88x is 12.6% higher than the 0.78x industry average. Its trailing-12-month CAPEX/Sales of 4.28% is 51.5% higher than the industry average of 2.82%.
NOC’s net revenues increased 2.3% year-over-year to $10 billion in the fiscal third quarter that ended on September 30, 2024. Its total operating income came in at $1.12 billion, up 10.2% from the prior-year period. In addition, the company’s net earnings came in at $1.03 billion, and EPS came in at $7, which were up 9.5% and 12.9% over the prior-year quarter.
Street expects NOC’s revenue and EPS for the fourth quarter ended December 31, 2024, to increase 3.1% and 1.2% year-over-year to $10.97 billion and $6.35, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of NOC have gained 7.1% over the past year and 5.9% year-to-date to close the last trading session at $497.02.
NOC’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
NOC has an A grade for Momentum and a B in Sentiment and Stability. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated NOC for Growth, Value, and Quality. Get all NOC ratings here.
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RTX shares were trading at $125.10 per share on Monday afternoon, down $0.21 (-0.17%). Year-to-date, RTX has gained 8.11%, versus a 1.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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