Defense stocks traded unevenly higher early Wednesday following a bullish research note from Citi. Huntington Ingalls was one of the leaders in the S&P 500 on the day. AeroVironment retreated after earnings. Cathie Wood purchased some AVAV shares amid Wednesday's decline.
Citi analyst Jason Gursky in a research note reported by The Fly.com wrote that defense stocks have "de-rated significantly" since November 2024, due to uncertainty surrounding impacts from the Department of Government Efficiency and plans from the Trump administration. Defense stocks are now pricing in a range of -1% to 1% growth, which is "too punitive" given the current backdrop for military spending.
This likely points to mid-single growth on the horizon, Gursky wrote. He also noted that European defense spending is likely to grow significantly, and added that recent budget resolutions from Congress add upward of $300 billion in spending over the next decade.
European leaders this past week have called to "urgently rearm" their Western allies in defense of Ukraine. Meanwhile, President Donald Trump paused military aide to Ukraine following an argument with President Zelenskyy at the White House. Trump repeated Moscow talking points that Ukraine is at fault for Russia invading the country.
Much of the spending growth will likely focus on modernization efforts to deter peers. "As such, we think it's time to buy defense stocks," Gursky wrote.
Citi has buy ratings on Curtiss-Wright, General Dynamics, Huntington Ingalls, Leidos, L3Harris Technologies, Lockheed Martin, Northrop Grumman, RTX, SAIC, Textron and V2X.
Meanwhile, Huntington Ingalls received a boost from President Trump's address in front of Congress on Tuesday.
President Trump during his speech announced plans to create a new shipbuilding office in the White House to revamp the commercial and naval ship manufacturing industries. President Trump mentioned special tax incentives to "bring this industry home," but did not provide further details on the financial incentives.
Huntington, through its Newport News Shipbuilding division, is the nation's sole designer and builder of nuclear-powered aircraft carriers, as well as one of two designers and builders of nuclear-powered submarines for the U.S. Navy. In addition, the company builds and services guided missile destroyers, as well as the LPD 17 San Antonio and LHA 6 America classes of amphibious warships.
Astronics also powered higher on President Trump's remarks. Astronics provides parts, communications and electronics equipment, and test solutions services for the U.S. Navy.
Defense Stocks React
Huntington Ingalls shares rallied 12.4% Wednesday, trailing only Moderna's nearly 16% gain in the S&P 500. Shares rebounded above their 50-day line on the move. HII rose a fraction Thursday.
ATRO stock soared almost 25% Wednesday. Astronics cleared a 23.74 buy point for a consolidation Wednesday, according to MarketSurge charts. ATRO stock slid 1.7% Thursday.
LMT, LHX and TXT climbed slightly Thursday. Shares sung higher Wednesday. CW stock and VVX declined Thursday to pare their Wednesday gains.
Northrop and SAIC gained 2.2% and 1.6%, respectively, Wednesday. General Dynamics shares surged 4.9%. The stocks were mixed with slight gains and declines Thursday.
RTX ticked higher, with shares trading in a cup buy zone following a late January breakout. RTX stock eased 1% Thursday.
London-based BAE Systems jumped 8.5% Wednesday, MarketSurge charts show. Shares have trended higher as European countries question if they can rely on the U.S. as an ally and defense supplier, given President Trump's moves regarding Ukraine. Airbus surged 5.8%. EADSY is trading above a cup-with-handle buy zone. Both stocks pared gains Thursday.
AeroVironment Earnings
AeroVironment was the exception, as shares tumbled following Q3 2025 results.
The missile and drone maker reported earnings of 30 cents per share adjusted, falling from 63 cents last year. Revenue declined 10% to $167.6 million.
FactSet analysts expected earnings of 48 cents per share on $187.6 million in revenue.
CEO Wahid Nawabi said that the fires in Southern California affected the company's performance during the quarter. Nawabi also noted this has been "a transition year pivoting away from Ukraine demand." Still, AeroVironment expects a "strong" 2025 fiscal year with record Q4 revenue.
Meanwhile, the company's backlog rose to a record $764 million powered by record Switchblade and Jump-20 orders.
For 2025, AeroVironment expects earnings to range from $2.92 to $3.13 per share adjusted. The defense contractor forecasts revenue between $780 million and $795 million. Still, the guidance was below FactSet views for earnings of $3.22 per share on $799 million in revenue.
AVAV stock pared its decline to 4.4% Wednesday. Shares tumbled 16% in early trade, falling to its lowest level since February 2024. AVAV stock inched lower Thursday.
Cathie Wood and her Ark Invest firm purchased 10,048 shares of AeroVironment on Wednesday, worth $1.36 million based on Wednesday's closing price. The shares were distributed across the ARK Autonomous Technology & Robotics ETF and the ARK Space Exploration & Innovation ETF, according to daily trade updates with the firm.
AeroVironment has fallen about 12% in 2025.
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