Given escalating global tensions and increased budgets, the defense industry appears poised for growth. Thus, investors could scoop up shares of fundamentally stable defense stocks, L3Harris Technologies, Inc. (LHX), Northrop Grumman Corporation (NOC), and General Dynamics Corporation (GD).
Recent foreign policy changes by President Trump regarding the Russia-Ukraine altercation have started raising concerns. The President has stated that Ukraine "should have never started the war", reversing three years of American policy towards Ukraine. Moreover, concerns about China's claim to Taiwan have also resulted in a heightened state of geopolitical uncertainty.
Additionally, the President’s plan to “take over” Gaza, relocate Palestinians to neighboring countries, and redevelop the war-torn enclave has also raised questions about future altercations. Breaking the decade-long two-state solution to the problem, Trump said, “The US will take over the Gaza Strip and we will do a job with it too.”
Amid this volatile environment, the Department of Defense has aptly reported the defense budget to be around $850 billion for 2025. For the long-term, the budget is projected to grow by 11% over the next 10 years, reaching $965 billion in 2039. Looking ahead, Mordor Intelligence forecasts the U.S. Defense Market to reach $382.56 billion by 2030, growing at a CAGR of 3.6%.
Now, let us dive deep into the fundamentals of three Air/Defense Services stocks, starting with #3.
Stock #3: L3Harris Technologies, Inc. (LHX)
LHX provides mission-critical solutions for government and commercial customers. The company's offerings include space payloads, sensors, full-mission solutions, classified intelligence, cyber, airborne combat systems, and mission networks for air traffic management operations.
On February 26, 2025, LHX announced a collaboration with Shield AI to enable an electronic warfare operation with AI-enabled unmanned systems aimed at sensing, adapting, and acting while executing physical and electromagnetic movements. As the market for AI in defense technology gets increasingly prevalent, this move could expand the company's AI portfolio and strengthen its market presence.
On February 20, 2025, LHX announced the beginning of construction on four new solid rocket motor production facilities at the company’s Camden site. Being a part of a $215.6 million agreement between the Defense Department’s Defense Production Act Title III program, this development is aimed at increasing domestic rocket propulsion manufacturing capacity for tactical and strategic missile capabilities.
Being a market leader in the aerospace sector, LHX's commitment to building the future of its solid rocket production could serve as a blueprint for future efforts with the Department of Defense.
For the fiscal 2024 fourth quarter that ended December 31, 2024, LHX’s revenue increased 3.4% year-over-year to $5.52 billion. Its operating income rose 269.5% from the year-ago value to $569 million. Additionally, net income attributable to LHX and non-GAAP EPS grew 186.7% and 3.6% from the prior year’s quarter to $453 million and $3.47, respectively.
Analysts expect LHX’s revenue for the fiscal 2025 first quarter (ending in March) to increase 1.5% year-over-year to $5.29 billion. Its EPS for the same period is expected to come in at $2.70. In addition, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.
LHX’s stock has surged 1.7% over the past five days, closing the last trading session at $202.33.
LHX’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LHX has a B grade for Growth, Stability, and Momentum. Within the Air/Defense Services industry, LHX is ranked #8 out of 70 stocks.
To access LHX’s Sentiment, Value, and Quality ratings, click here.
Stock #2: Northrop Grumman Corporation (NOC)
NOC is an aerospace and defense technology company. The company functions through four segments: Aeronautics Systems; Defense Systems; Mission Systems; and Space Systems.
For the fiscal 2024 fourth quarter that ended December 31, 2024, NOC’s total sales increased 4.4% year-over-year to $41.03 billion. Its operating income rose 72.3% from the year-ago value to $4.37 billion. Moreover, the company’s net earnings and EPS grew 103% and 109.5% from the prior year’s quarter to $4.17 billion and $28.34, respectively.
Also, the company has released its guidance for the fiscal year 2025. NOC expects sales to be in the range of $42 billion to $42.50 billion. Its segment operating income is expected to come in the range of $4.65 billion to $4.80 billion. Additionally, NOC anticipates its free cash flow to be within the margin of $2.85 billion and $3.25 billion.
Street expects NOC’s EPS for the fiscal 2025 first quarter (ending in March) to increase marginally year-over-year to $6.34. Its revenue for the same period is expected to come in at $10.10 billion. Moreover, the company has surpassed consensus EPS estimates in all four trailing quarters, which is noteworthy.
NOC’s shares surged 2.9% over the past five days to close the last trading session at $454.87.
NOC’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
NOC has a B grade for Stability, Momentum, and Value. Within the Air/Defense Services industry, NOC is ranked #7 out of 70 stocks.
Click here to access NOC’s Sentiment, Growth, and Quality ratings.
Stock #1: General Dynamics Corporation (GD)
GD is an aerospace and defense company. It provides business jets, aircraft maintenance and repair, nuclear-powered submarines, land combat solutions, information technology solutions, and more. The company functions through four segments: Aerospace; Marine Systems; Combat Systems; and Technologies.
On December 20, 2024, GD’s business unit, GD’s business unit, General Dynamics Information Technology secured a new $5.6 billion contract with the Air Force Mission Partner Capabilities Office.
Under this five-year-long contract, the company will aid in the process of modernizing and integrating the Department of Defense's Mission Partner Environments. This move could enhance the company's future contracts with the Department of Defense and other federal security organizations.
For the fiscal 2024 fourth quarter that ended December 31, 2024, GD’s revenue increased 14.3% year-over-year to $13.34 billion. Its operating earnings rose 10.5% from the year-ago value to $1.42 billion. Additionally, the company’s net earnings and EPS grew 14.2% and 14% from the prior year’s quarter to $1.15 billion and $4.15, respectively.
The consensus revenue and EPS estimates of $11.89 billion and $3.45 for the fiscal 2025 first quarter (ending in March) reflect a year-over-year increase of 10.8% and 19.7%, respectively. Furthermore, the company has surpassed the consensus revenue estimates in three of four trailing quarters.
GD’s stock has surged 1.7% over the past five days to close the last trading session at $249.24.
GD’s stable fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
GD has a B grade for Momentum and Value. Within the same industry, GD is ranked #6 out of 70 stocks.
In addition to the POWR Rating highlighted above, you can check GD’s ratings for Stability, Growth, Sentiment, and Quality here.
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GD shares were unchanged in premarket trading Thursday. Year-to-date, GD has declined -4.91%, versus a 1.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Aritra_Gangopadhyay
Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.
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