Defense stocks occupy a rare position in today’s market, where geopolitical anxiety, fiscal generosity, and multi-year revenue visibility converge simultaneously.
The Department of War’s Fiscal Year 2027 investment request totals $756.8 billion, with President Trump declaring the military budget “should not be $1 Trillion Dollars, but rather $1.5 Trillion Dollars.”
Goldman Sachs has framed economic security as a prominent theme in 2026, with NATO defense commitments and reindustrialization creating substantial opportunities for active managers.
Three defense names stand out heading into the second half of the year, each backed by verifiable data and a clear bull case, though each carries a real risk worth pricing in.
Lockheed Martin (NYSE: LMT) trades at $545.70, up nearly 8% over the past month and approximately 10% over the trailing year, with a forward P/E of 17 and a dividend yield of 3%.
The company ended 2025 with a record $194 billion backlog representing more than 2.5 years of sales, and management reaffirmed FY2026 guidance of $77.5 to $80.0 billion in sales and diluted EPS of $29.35 to $30.25.
The Department of War signed multi-year framework agreements to scale Patriot, THAAD, and PrSM production by three to four times current rates, and Lockheed secured a $4.8 billion PAC-3 missile production contract.
CEO Jim Taiclet said the year’s start “reinforces our confidence in Lockheed Martin’s continued operational and financial growth in the year ahead,” though Q1 2026 EPS of $6.44 missed the $6.70 estimate due to a $125 million F-16 unfavorable profit adjustment.
Northrop Grumman (NYSE: NOC) has been the weakest performer of the three, down 12% year-to-date to $504.60, but that underperformance is precisely what makes it attractive, with analysts carrying an average target of $695.05.
Q1 2026 saw Northrop post EPS of $6.14, beating the $6.06 estimate, while revenue grew 4% to $9.88 billion and net income climbed 82% year-over-year.
The B-21 Raider program swung from a $183 million operating loss to $305 million in operating income, a turnaround that should compound as production scales, with backlog standing at $95.61 billion and a 1.10 book-to-bill ratio.
On May 20, 2026, ten Northrop directors each purchased 349 shares at $552.17, a coordinated insider buy that strongly signals management views the stock’s pullback as an opportunity.
CEO Kathy Warden described the quarter as reflecting “our ability to deliver in today’s unprecedented global demand environment,” though the B-21 LRIP program still carries memory of a $477 million loss provision and government shutdown risk is not included in guidance.
RTX (NYSE: RTX) is the only one of the three to raise full-year guidance following Q1, and its price performance reflects that distinction, trading at $188.54, up 32% over the past year.
Q1 2026 adjusted EPS of $1.78 beat the $1.52 estimate by 17%, marking the eighth consecutive quarterly beat, and RTX raised its FY2026 outlook to adjusted sales of $92.5 to $93.5 billion with adjusted EPS of $6.70 to $6.90.
RTX ended Q1 with a $271 billion backlog split between $162 billion commercial and $109 billion defense, bolstered by recent wins including a $1.1 billion U.S. Navy AIM-9X contract and a $515 million SPY-6 radar contract.
CEO Chris Calio cited “organic sales and adjusted operating profit growth across all three segments” as the driver behind the raised outlook, though the Pratt and Whitney powder metal matter requiring accelerated GTF fleet inspections remains a multi-year cash drag.
Q2 earnings are expected in late July for all three companies, with Lockheed and Northrop reporting in the same calendar week and RTX close behind, setting up a critical test of whether the momentum across each program is sustainable.
With collective backlogs approaching $560 billion and a defense budget trajectory pointing decisively higher, the setup across all three names favors continued operational delivery rather than multiple expansion as the primary return driver.
