The fiscal 2025 National Defense Authorization Act calls for $923.3 billion in U.S. military spending, up 4.1% from 2024 levels. The ongoing war in Ukraine; tensions between China and Taiwan; and conflicts between Israel and Iran, Hezbollah and Hamas may force the U.S. government to increase defense industry investment in the coming years, which could serve as a tailwind for defense industry earnings.
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Defense stocks are attractive investments because they often have predictable, long-term government contracts. Here are seven defense stocks to buy with big upside potential, according to Morgan Stanley:
| Stock | Upside Potential From May 1 |
| RTX Corp. (ticker: RTX) | 5.9% |
| Lockheed Martin Corp. (LMT) | 20.3% |
| Northrop Grumman Corp. (NOC) | 17.1% |
| TransDigm Group Inc. (TDG) | 9.8% |
| Howmet Aerospace Inc. (HWM) | 4.7% |
| Axon Enterprise Inc. (AXON) | 2.2% |
| Curtiss-Wright Corp. (CW) | 15.6% |
RTX Corp. (RTX)
RTX is the defense behemoth created by the 2020 merger of Raytheon and United Technologies. The company’s Collins and Pratt & Whitney subsidiaries are more focused on the commercial aerospace industry, but its Raytheon subsidiary develops advanced sensors and provides training, software and cybersecurity solutions for the U.S. intelligence community and the Department of Defense. Analyst Kristine Liwag says RTX’s stock has pulled back on market concerns about tariffs, but she says more than half of the company’s revenues come from its insulated defense business. Morgan Stanley has an “overweight” rating and $135 price target for RTX stock, which closed at $127.41 on May 1.
Lockheed Martin Corp. (LMT)
Lockheed Martin is one of the world’s largest defense, security and intelligence firms and is also an important supplier to NASA and other non-defense government agencies. The company produces missile and targeting systems, as well as mission systems for ships, submarines and aircraft. It also manufactures Black Hawk military helicopters. Liwag says Lockheed is her top overall defense industry stock pick, and she says the company is positioned to benefit from President Donald Trump’s pursuit of a “Golden Dome” missile defense system. Morgan Stanley has an “overweight” rating and $575 price target for LMT stock, which closed at $477.72 on May 1.
Northrop Grumman Corp. (NOC)
Northrop Grumman is one of the world’s largest weapons and military technology producers. The company’s defense systems segment provides battle management and missile systems products and services, while its mission systems segment focuses on airborne sensors and networks, and other military and intelligence mission solutions. Liwag says Northrop’s recent $477 million pre-tax charge on its B-21 strategic bomber program was an unpleasant surprise, but the stock’s overall risk-reward profile remains attractive given the prospects for accelerating U.S. defense spending and international upside potential. Morgan Stanley has an “overweight” rating and $570 price target for NOC stock, which closed at $486.67 on May 1.
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TransDigm Group Inc. (TDG)
TransDigm designs and manufactures original aircraft parts sold to manufacturers. The company also produces aftermarket replacement parts sold to commercial and military aircraft operators. In recent years, TransDigm has announced several significant buyouts, including acquiring SEI Industries, Raptor Scientific, and the components and subsystems business of Communications & Power Industries. Liwag says the commercial aftermarket demand and pricing backdrops are strong, and she says recent acquisitions may significantly improve TransDigm’s margins moving forward. Liwag also anticipates a positive impact from TransDigm’s latest manufacturing contract with Boeing Co. (BA). Morgan Stanley has an “overweight” rating and $1,575 price target for TDG stock, which closed at $1,434.19 on May 1.
Howmet Aerospace Inc. (HWM)
Howmet Aerospace manufactures lightweight metal products, specializing in jet engine components, titanium structural parts, aerospace fastening systems and forged wheels. The company also provides defense solutions to its military partners, such as precision machining, integrated program management and metals expertise. Liwag says Howmet is a high-quality aerospace supplier that should benefit from strong demand in the commercial aircraft aftermarket. In addition, she says the company’s industrial gas turbine blades will be critical to the energy industry as artificial intelligence and data center power demand rises. Morgan Stanley has an “overweight” rating and $155 price target for HWM stock, which closed at $148.03 on May 1.
Axon Enterprise Inc. (AXON)
Axon Enterprise is a law enforcement hardware and software provider. In addition to supplying body-worn cameras and other hardware to law enforcement and military customers, Axon also provides training and cloud-based software services such as digital evidence management. Analyst Meta Marshall says the company’s recent Axon Week 2025 event highlighted the numerous advancements the company has made throughout its product portfolio and reinforced her belief that software and AI offerings can help Axon maintain its 25% to 30% annual revenue growth rate for the foreseeable future. Morgan Stanley has an “overweight” rating and $635 price target for AXON stock, which closed at $621.10 on May 1.
Curtiss-Wright Corp. (CW)
Curtiss-Wright provides specialized solutions, engineered products and other services primarily to the aerospace and defense markets. The company’s defense electronics segment includes products such as commercial off-the-shelf embedded computing board-level modules, integrated subsystems, and data acquisition and flight test instrumentation equipment. Liwag says Curtiss-Wright is well aligned with Defense Department priorities. The company is also optimistic about commercial nuclear power demand and anticipates an AP1000 nuclear reactor order from Poland by the end of 2026. Recent acquisitions of Ultra Energy and WSC further boost Curtiss-Wright’s nuclear profile. Morgan Stanley has an “overweight” rating and $405 price target for CW stock, which closed at $350.28 on May 1.
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7 Best Defense Stocks to Buy Now originally appeared on usnews.com
Update 05/02/25: This story was published at an earlier date and has been updated with new information.
