Top Defense Stocks to Invest in 2024

Defense stocks are similar to healthcare stocks in that they remain little scathed in times of high inflation or economic downturns. The amount of defense spending, whether by the U.S., or elsewhere, has more to do with the level of global conflict than it does with economic pressures.

Over the past two years, the Russian invasion of Ukraine, tensions in Southeast Asia and the continuing conflict in the Middle East is ratcheting up spending on defense.

Defense industry stocks are solid long-term investments because they benefit from stable, multiyear government contracts. Let’s take a look at our picks of the 10 best defense stocks available today. 

Best Defense Stocks to Buy in 2024

  1. Lockheed Martin: The world’s largest defense company is the U.S. government’s biggest contractor. It’s involved in arms, such as missiles and advanced weapons systems, aerospace, technology, and information security.
  2. TransDigm Group: The fast-growing airplane parts manufacturer, based in Cleveland, Ohio, makes replacement parts for commercial and military aircraft and has been active in acquisitions.
  3. L3Harris Technologies: The aerospace and defense company, which builds communications, avionics and satellite systems, last year bought Aerojet for $4.7 billion, and Viasat’s tactical data link business for $2 billion.
  4. General Dynamics: The military shipbuilder, also makes tanks and land vehicles, and provides IT support for the defense industry. 
  5. Textron: The military and industrial equipment company that makes Bell helicopters and Cessna aircraft posted average earnings-per-share growth of more than 50% in the past three years. 
  6. RTX: Formerly known as Raytheon Technologies, the world’s largest aerospace and defense company employs 185,000 people globally. It makes jet engines and airplane parts for commercial and defense aircraft. 
  7. Northrop Grumman: The company is involved in everything to do with defense, from missile systems to tactical weapons, military aircraft systems, radar and satellite technology.
  8. Curtiss-Wright Group: The company provides engineered products and services to the defense and aerospace industries, as well as to commercial power, process and industrial markets.
  9. Boeing: The U.S. company is one of the leading commercial aircraft manufacturers but also makes military aircraft and helicopters, as well as autonomous submarines used by the defense industry.
  10. Leidos Holdings: Following its merger with Lockheed Martin’s IT business in 2016 it became the defense industry’s largest IT services provider. It serves the government and industrial information segments. 

A Closer Look at the Best Defense Stocks in 2024

Now, let’s take an in-depth look at the best defense stocks:

1. Lockheed Martin – Best Defense Stock With Growth Driven by Space

Lockheed is involved in all things related to the military and is seeing strong growth in its aerospace sales, but its fastest growing segment is its Space division. Sales at the unit, which makes military satellites, space probes, missile defense systems and NASA’s Orion spacecraft, increased 9% in 2023, compared with growth of 2% or less posted by its other segments.

Lockheed graphic

It’s attempting to buy satellite manufacturer Terran Orbital, in which it already owns a stake, for $500 million. 

In fiscal 2023, the company had earnings per share (EPS) of $27.55, up 27% and revenue of $67.6 billion, up 1%. As of the fourth quarter, it had a record backlog of $160.6 billion in orders. 

The company made relatively conservative estimates for 2024, which could be weigh on the stock a bit. It said it expects revenue between $68.5 billion and $70 billion, up 24.4% at the midpoint, but EPS of only between $25.65 and $26.35.

Lockheed has an above-average dividend, which it has raised for 21 consecutive years, including a 5% bump last year to $3.15. It’s trading at less than 16 times earnings, making it one of the few cheap defense stocks.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: LMT -9.25% 2.91% 15.72

2. TransDigm Group – Huge Margins, Huge Moat

TransDigm is a relative newcomer as a defense stock, as it listed after an initial public offering in 2006. It makes a huge array of aircraft parts that it developed, including cockpit security systems, pumps, valves and parachute systems for airlines and the defense industry. Aftermarket parts are the company’s biggest revenue generator.

TransDigm graphicIts earnings growth has been impressive. In the first quarter of fiscal 2024, revenue rose 28% to $1.79 million, year over year, and EPS was up 46% to $4.87, over the same period. The company is known for its huge margins, with earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 52% in the first quarter, compared to the aerospace industry and defense industry EBITDA margin average of around 9.03%.

The stock isn’t cheap because its price has grown more than 160% over the past five years. However, TransDigm continues to thrive by buying out its smaller rivals to increase its market share and pricing power. It has bought 88 businesses since it was founded in 1993. While TransDigm doesn’t offer a regular dividend, it did issue a $35 per share special dividend to investors in the fourth quarter of fiscal 2023.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: TDG 61.41% N/A% 49.00

3. L3Harris Technologies – Defense Disruptor With Growing Margins

Despite being the sixth-largest defense company by market capitalization, L3Harris isn’t as well known. It makes advanced tech to serve land, sea and air operations. 

L3Harris graphicAfter L3Harris spent $4.7 billion last year to buy Aerojet Rocketdyne, which makes rocket engines and propulsion systems, it’s paring down other, less-profitable efforts, including its Commercial Aviation Solutions business. It’s trying to whittle down its $11.2 billion in long-term net debt.

In 2023, it posted revenue of $19.4 billion, up 14% and EPS of $6.44, up 17%. It said it expects revenue to be between $20.7 billion and $21.3 billion in 2024, up 8% at the midpoint. It also said it expects adjusted EPS between $12.40 and $12.80, up from $12.36 in 2023. 

The company just bumped up its quarterly dividend by 1.7% to $1.16, the 23rd consecutive year it lifted it.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: LHX 6.66% 2.16% 33.36

4. General Dynamics – Warship Maker With Strong Revenue Growth

General Dynamics makes warships for the Navy, and armored vehicles for the Army and Marine Corps, as well as munitions and weapons systems. It also makes business jets through its ownership of Gulfstream. The defense contractor stock had a backlog of $93.63 billion in orders at the end of 2023, which should ultimately turn into sales.

General Dynamics graphicIn 2023, General Dynamics had record revenue of $42.3 billion, up 7.3%. However, because many of its contracts prevent the company from raising prices, while its own costs rose due to inflation, its yearly EPS dropped by 1.4% to $12.02. The profit picture improved in the fourth quarter, though, with the company reporting EPS of 3.64, up 1.7%, year over year.

The company just boosted its quarterly dividend by 7.6% to $1.42, the 27th consecutive year it has increased its dividend.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: GD 24.58% 2.08% 22.67

5. Textron – Best Small Defense Stock for Profit Growth

Textron and its subsidiaries make a huge array of equipment, such as snowmobiles, business jets, electric military aircraft and virtual reality flight simulators. Over the past three years, its net income has grown by 43.9%.

Textron graphicIn 2023, Textron had revenue of $13.7 billion, up 6.3% and EPS from continuing operations of $4.57, up 13.9%. All of its segments saw sales growth, but its Bell segment, known for its military and commercial helicopters, was the biggest driver of overall revenue with a 10.8% revenue increase to $3.8 billion.

Textron said it expects 2024 revenue of $14.6 billion, representing an increase of 6.5% and EPS from continuing operations to be between $5.62 and $5.82. Textron has kept its quarterly dividend at $0.02 since it trimmed it from $0.23 in 2009. It also bought $1.17 billion of its own shares in 2023.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: TXT 35.51% 0.08% 19.91

6. RTX – Best Defense Stock for Long-Term Growth

RTX operates in three segments, Pratt & Whitney, which manufactures jet engines and auxiliary power units, Collins Aerospace, which makes more than 2,000 thermoplastic parts in 20 different types of aircraft, and Raytheon, which makes missiles, aircraft radar systems, weapons sights and targeting systems, communication and battle-management systems, and satellite components. 

rtx graphicIn 2023, RTX saw sales of $68.9 billion, up 3%. EPS was down 36%, though, to $2.22, due to expenses needed to correct the contamination in the powered metal used to make certain engine parts. That pushed down the share price significantly. Yet, the company has a huge order backlog of $196 billion, and that should continue to drive revenue.

The company predicted 2024 revenue of between $78 billion and $79 billion, up 13.9% at the midpoint, and adjusted EPS of between $5.25 and $5.40, compared to adjusted EPS of $5.06 in 2023. RTX raised its quarterly dividend by 7.3% last year to $0.59, raising it for the 26th consecutive year. 

Ticker  One-year price change:  Dividend Yield P/E
NYSE: RTX -6.11% 2.58% 41.11

7. Northrop Grumman – Flying Under the Radar for Now

Developing a new stealth bomber for the U.S. military, Northrop Grumman is a global aerospace, defense and security company. It also makes airplanes, avionics, spacecraft, space sensors, weapons, munitions and information systems and employs about 100,000 people. It has a huge backlog of $84.2 billion in orders.

Northrop Grumman graphicIt saw revenue rise 7% in 2023 to $39.3 billion. Full-year EPS fell 57%, however, to $13.53, mainly due to high production costs associated with the early stages of the company’s development of the B-21 stealth bomber. The experience has meant that the company has passed lately on other fixed-cost contracts with the Department of Defense. One product worth watching is the development of the company’s RQ-180, an unpiloted stealth surveillance drone designed to be operated in contested airspaces.

The company’s best-performing sector is space, where it had $14 billion in sales last year, up 14%. Northrup raised its quarterly dividend by 8% in 2023 to $1.87, lifting it for the 20th consecutive year. 

Ticker  One-year price change:  Dividend Yield P/E
NYSE: NOC 0.33% 1.63% 33.95

8. Curtiss-Wright Group – Record Sales, Improved Profits

The company doesn’t make planes or nuclear submarines, but it makes everything to help them run, from valves and pumps to sensors and electronic modules and systems. It operates in three segments: Aerospace & Industrial; Defense Electronics; and Naval & Power.

Curtiss-Wright graphicIn 2023, the company achieved double-digit revenue and earnings growth, Revenue climbed 11% to $2.8 billion and EPS rose 15% to $9.38. Its predictions for this year are more modest. It expects revenue to climb 4% to 6% to between $2,96 billion and $3.01 billion, and EPS to jump 7% to 10% to between $10 and $10.30. The big drivers for the growth included ground defense tactical communications systems and original parts for commercial aerospace.

The company raised its quarterly dividend by 5.2% last year, its seventh consecutive year of increases. It also bought back $50 million of its own shares.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: CW 42.16% 0.34% 25.82

9. Boeing – Beaten-Down Defense Stock Won’t Stay Down

Boeing has been in the news lately, all for the wrong reasons. The Justice Department, in March, began an investigation of the company when parts of an Alaska Airlines’ Boeing 737 Max’s fuselage came off mid-flight, the latest in a series of issues regarding quality control at the company. The news has driven down the stock, but because the company’s overall business remains strong, it has made the price of its shares more attractive.

Boeing graphicIn fiscal 2023, Boeing had revenue of $77.8 billion, up 17%. The company hasn’t turned a profit for five consecutive quarters, but in 2023, it trimmed its annual loss per share by more than half to $3.67.

The company operates in three segments: Commercial Airlines; Defense, Space & Security and Global Services. All three had revenue growth in 2023, but Defense, Space & Security was the best performer, increasing 9%. The company, late last year, won a contract to produce 15 KC-46A Tankers for the U.S. Air Force. The segment’s backlog was $59 billion, including 29% of orders outside the U.S.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: BA -5.37% N/A% N/A

10. Leidos Holdings – Poised to Rebound After Restructuring

The largest provider of defense IT has 47,000 employees and operates in three segments: Defense Solutions, Civil and Health. Of the three, Defense Solutions is the biggest revenue earner. The company’s healthcare business, though, appears to be growing at a faster rate, and also has higher profit margins, making it one of the top defense stocks to watch.

Leidos graphicThe company just landed a $158 million contract to modernize the Air Force’s Command and Control Incident Management Emergency Response Application, a government-owned software application system.

In 2023, Leidos had revenue of $15.4 billion, up 7.2%, while EPS was down 70% to $1.44, thanks to substantial charges related to the company’s restructuring. Leidos expects more growth in 2024, with full-year revenue guidance of between $15.7 billion and $16.1 billion, and adjusted EPS of between $7.50 and $7.90. In 2023 it had  $7.30 in adjusted EPS in 2023. The company raised its quarterly dividend by 5.5% last year to $0.38, the fifth consecutive year it has increased it.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: LDOS 37.42% 1.20% 87.89

How to Pick the Best Defense Stocks to Invest in

Benefiting from long-term government contracts, defense stocks can be solid long-term investments with stable earnings growth.  Here are factors to watch for when picking the best defense stocks:

Look for Companies with a Significant Competitive Edge

Some defense companies are so specialized that it’s hard for a competitor to cut into their market share. A good example is TransDigm Group, which has big margins because it has bought up much of its competition.

Find Defensive Stocks with Balanced Revenue Streams

While defense stocks primarily rely on government spending for revenue, some of the top defense stocks have solid commercial revenue streams, which give them more diversity. That can make a big difference. One company can be saddled with a government contract with no raises possible to compensate for inflation, while  another company, such as Boeing, also serves the commercial sector, where it can more easily raise prices.

Does it Have an Above-Average Dividend?

Many defense stocks, because they have stable cash flow, deliver an above-average dividend. That gives investors a steady stream of income on top of any potential stock price appreciation and encourages long-term investing.

There Are Defense ETFs

If you would rather not pick just one or two defense companies to invest in, there are exchange-traded funds (ETFs) that provide exposure to and diversification in the sector. Some of the leading defense ETFs are:

  • SPDR S&P Aerospace & Defense (NYSEMKT: XAR), which has a broad exposure to stocks in the S&P Aerospace & Defense Select Industry Index.
  • Invesco Aerospace & Defense (NYSEMKT: PPA), which is based on the SPADE Defense Index.
  • iShares U.S. Aerospace & Defense: (BATS: ITA), which is the largest defense ETF and follows the Dow Jones U.S. Select Aerospace & Defense Index.

Where to Get Defense Stock Tips and Insights

AltIndex, a subscription-based service that uses alternative data and artificial intelligence (AI) to rate stocks is a good place to find and rate defense stocks. AltIndex updates its data throughout the day. 

AltIndex graphicAltIndex even has a special ranking of the best defense stocks. The list, which uses an AI score, shows defense stocks that are making a big move and metrics that might be driving that move. The list is updated every half hour with real-time updates on share prices of top defense stocks.

AltIndex out-of-the-box metrics for analyzing a stock include customer satisfaction rankings, web searches, social media, and app downloads. It then takes that data to compare defense stocks to other similar stocks, using a rating system from 1 to 100 to make it easier for investors.

AltIndex has more than 10,000 members and provides more than 100,000 stock insights and alerts each day, and has a strong win rate of 75% from its AI stock picks.

You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well many other useful features.

Conclusion

Defense stocks can help add stability to an investor’s portfolio. In many ways, they are like utility stocks because of their consistent, if unspectacular, revenue growth. Government spending on defense is on the upswing, because of unrest around the globe and that portends well for defense stocks.

We already know that defense spending is going up this year, at least in the U.S., with the National Defense Authorization Act allotting $886.3 billion in military spending, an increase of 3.3% from 2023.

Defense stocks are also similar to semiconductor stocks in some respect, because it’s a hard industry to get into, but once you are in, you can have a significant competitive advantage. Defense stocks can also be used by investors to help diversify their portfolios while adding more income-producing stocks.

References

https://www.sec.gov/Archives/edgar/data/936468/000093646824000019/exhibit997.htm

https://investors.lockheedmartin.com/stock-information/dividend-history

https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=201

https://www.l3harris.com/newsroom/press-release/2023/07/l3harris-completes-aerojet-rocketdyne-acquisition

https://www.l3harris.com/newsroom/press-release/2024/02/l3harris-announces-quarterly-dividend-increase

https://www.gd.com/Articles/2024/03/general-dynamics-board-increases-dividend

https://christianbaghai.medium.com/the-rq-180-the-secret-spy-drone-that-can-fly-higher-and-farther-than-any-other-1140933ad59e

https://news.northropgrumman.com/news/releases/northrop-grumman-increases-quarterly-dividend-8-percent-to-1-87

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Jim Halley
Editor

I am an experienced journalist who has also worked as an editor and writer at the Savannah Morning News, Salt Lake Tribune, USA Today, Stars and Stripes, and The Motley Fool. I spent the first half of my career in sports journalism, but in recent years have switched to writing about my other passion, stocks, particularly healthcare, real estate and consumer staples stocks. I've won numerous journalism awards from the Associated Press and state press associations and have been a judge for the Georgia Sportswriters Association. I've written one non-fiction book, Just One More Time, about Georgia Southern football, and…