The aerospace and defense industry is on the cusp of a major transformation driven by rising conflicts around the globe, sustainability, and advanced technologies. Thus, quality defense stocks RTX Corporation (RTX), Northrop Grumman (NOC), and Lockheed Martin (LMT) are poised to capitalize on these trends and deliver strong returns. Their strong fundamentals and solid growth metrics make them attractive options for long-term investors.
Ongoing global instability and escalating conflicts are accelerating defense spending worldwide, providing a significant boost to the aerospace and defense sector. As nations prioritize enhancing their defense capabilities, the demand for advanced military technologies and systems continues to rise, driving strong growth in the industry.
The aerospace and defense industry is projected to reach $616.32 billion this year, driven by escalating global conflicts and increased defense spending by nations.
In addition, emerging technologies are transforming aerospace and defense. AI boosts efficiency through predictive maintenance and optimized design, while 3D printing enables faster, cost-effective production. Advanced air mobility is reshaping transportation, and immersive tools with advanced satellites support complex missions. As a result, the global aerospace and defense market is expected to reach $1.39 trillion by 2030, growing at a CAGR of 8.2%.
Here are three Air/Defense Services stocks poised to deliver strong growth in the years ahead.
Stock #3: RTX Corporation (RTX)
RTX is a leading aerospace and defense company serving commercial, military, and government clients globally. Its products include aircraft engines, aerospace systems, defense solutions, and cabin interiors, catering to airlines, aircraft manufacturers, defense forces, and space operations.
RTX’s revenue has grown at a CAGR of 7.4% over the past three years and its operation income has risen at a CAGR of 14.5% over the same time frame.
On November 12, 2024, Collins Aerospace, an RTX business, secured a $19 million Department of Defense contract to equip the UK Royal Air Force's H-47 Chinooks with the Common Avionics Architecture System (CAAS), enhancing interoperability with U.S. Chinooks through advanced digital cockpit systems.
On November 7, 2024, Pratt & Whitney Canada, an RTX business partnered with Next Hydrogen Solutions Inc. to develop hydrogen combustion technology for the PW127XT turboprop engine under the Hydrogen Advanced Design Engine Study (HyADES), supported by Canada’s Initiative for Sustainable Aviation Technology (INSAT).
The company pays an annual dividend of $2.52, which translates to a dividend yield of 2.12% at the prevailing price levels.
During the fiscal third quarter that ended September 30, 2024, RTX’s adjusted sales increased 6% year-over-year to $20.09 billion. Its adjusted operating profit grew 11.3% from the year-ago value to $2.48 billion. Moreover, adjusted net income attributable to common shareholders and adjusted EPS stood at $1.95 billion and $1.45, respectively, representing increases of 6.9% and 16% over the prior-year quarter.
Analysts expect RTX’s EPS and revenue for the fourth quarter ending December 31, 2024, to increase 6.7% and 3.4% year-over-year to $1.38 and $20.61 billion, respectively. It surpassed the Street EPS and revenue estimates in each of the trailing four quarters, which is promising.
Over the past year, the stock has gained 42.1% to close the last trading session at $118.10. It soared 40.4% year-to-date.
RTX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
RTX has a B grade in Growth and Momentum. It is ranked #12 out of 72 stocks in the Air/Defense Services industry.
Beyond what we have stated above, we also have given RTX grades for Value, Stability, Sentiment, and Quality. Get all the RTX’s ratings here.
Stock #2: Lockheed Martin Corporation (LMT)
LMT is a global aerospace and defense company providing advanced technologies, including combat aircraft, missile defense systems, helicopters, satellites, and cyber solutions, primarily for the U.S. government and international military clients.
LMT’s revenue has grown at a CAGR of 2.4% over the past three years and its operation income has risen at a CAGR of 5.8% over the same time frame.
On October 30, 2024, LMT completed its acquisition of Terran Orbital and its subsidiary Tyvak International, strengthening its capabilities in modular spacecraft manufacturing. The companies had previously collaborated on Space Development Agency programs and technology demonstrations.
On October 2, 2024, LMT approved a fourth-quarter dividend of $3.30 per share, a $0.15 increase from the previous quarter. The dividend will be paid on December 27, 2024, to shareholders of record as of December 2, 2024. It pays an annual dividend of $13.20, which translates to a dividend yield of 2.54% at the prevailing price levels.
In the fiscal third quarter ended September 29, 2024, LMT’s net sales increased 1.3% year-over-year to $17.10 billion. Its gross profit was $2.12 billion, up 3.4% from the year-ago value. Moreover, its operating profit and EPS stood at $2.14 billion and $6.80, up 4.8% and marginally over the prior-year quarter, respectively.
Street expects LMT’s revenue for the fiscal year (ending December 31, 2024) to increase 5.4% year-over-year to $71.24 billion. Its EPS for the same year is expected to be $26.69. In addition, it surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
The stock climbed 14.1% year-to-date and has returned 14.7% over the past year to close the last trading session at $517.
LMT’s POWR Ratings reflect strong prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value, Momentum, Sentiment, and Quality. It is ranked #5 in the same industry.
To access LMT’s Growth and Stability ratings, 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 revenue has grown at a CAGR of 3.3% over the past three years and its total assets has risen at a CAGR of 4.5% over the same time frame.
It pays an annual dividend of $8.24, which translates to a dividend yield of 1.70% at the prevailing price levels.
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 ending December 31, 2024, to increase 2.9% and marginally year-over-year to $10.95 billion and $6.33, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of NOC have gained marginally over the past year and 3.7% year-to-date to close the last trading session at $485.21.
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.
It has a B grade for Momentum, Stability, and Sentiment. Within the same industry, it is ranked #4.
Click here to see NOC’s ratings for Growth, Value, and Quality.
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RTX shares were trading at $118.95 per share on Wednesday afternoon, up $0.85 (+0.72%). Year-to-date, RTX has gained 44.69%, versus a 28.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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