The fiscal 2025 National Defense Authorization Act (NDAA) 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 involving Israel, the U.S., Iran and Hamas may force governments to increase defense industry investment in the coming years, which could serve as a tailwind for defense sector 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/Downside Potential From June 27 Close |
| RTX Corp. (ticker: RTX) | -6.6% |
| Lockheed Martin Corp. (LMT) | +25.3% |
| TransDigm Group Inc. (TDG) | +5.1% |
| Northrop Grumman Corp. (NOC) | +15.3% |
| Howmet Aerospace Inc. (HWM) | -8.1% |
| Axon Enterprise Inc. (AXON) | -15.1% |
| Curtiss-Wright Corp. (CW) | -16.9% |
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 products for the U.S. intelligence community and the Department of Defense. Analyst Kristine Liwag says RTX is attractively valued, and the company should have no problem offsetting the negative impacts of tariffs in the next five years as its existing contracts roll off. Morgan Stanley has an “overweight” rating and $135 price target for RTX stock, which closed at $144.66 on June 27.
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, along with mission systems for ships, submarines and aircraft. It also manufactures Black Hawk and Seahawk military helicopters. Liwag says elevated international defense demand and the Donald Trump administration’s pursuit of a “Golden Dome” missile defense system play right into Lockheed’s strengths, making Lockheed her top overall defense sector stock pick. Morgan Stanley has an “overweight” rating and $575 price target for LMT stock, which closed at $458.59 on June 27.
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 latest sales data and booking trends from distributors suggest the commercial aircraft aftermarket remains strong. She says TransDigm has a healthy balance sheet that will also allow for significant capital deployment in the coming years. Morgan Stanley has an “overweight” rating and $1,575 price target for TDG stock, which closed at $1,499.17 on June 27.
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Northrop Grumman Corp. (NOC)
Northrop Grumman is one of the world’s largest weapons and military technology producers. The company’s defense 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 products. Liwag says Northrop’s $477 million pre-tax charge in the first quarter related to its B-21 bomber program blindsided investors, but she says the charge was mostly related to process changes aimed at allowing Northrop to ramp up aircraft production more quickly. Morgan Stanley has an “overweight” rating and $570 price target for NOC stock, which closed at $494 on June 27.
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 services to its military partners, such as precision machining, integrated program management and metals expertise. Liwag says Howmet earnings should outgrow its aerospace and defense end markets in the coming years thanks to price hikes, market share gains and strong execution. She says Howmet’s technology advantage in its engine products business will help it maintain bargaining power and a wide competitive moat. Morgan Stanley has an “overweight” rating and $170 price target for HWM stock, which closed at $184.90 on June 27.
Axon Enterprise Inc. (AXON)
Axon Enterprise is a law enforcement hardware and technology 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 durable software revenue is making up a growing percentage of Axon’s overall sales, creating opportunities for the company to maintain a 25% to 30% growth rate. Marshall says artificial intelligence offerings will likely support that growth and Axon’s overall positive momentum. Morgan Stanley has an “overweight” rating and $695 price target for AXON stock, which closed at $818.87 on June 27.
Curtiss-Wright Corp. (CW)
Curtiss-Wright provides specialized products and 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. In May, Curtiss-Wright raised its guidance for sales, operating income and free cash flow, and Liwag says the improved outlook is particularly impressive given it also includes expected negative impacts from tariffs. The company also reported more than $1 billion in new orders in the quarter. Morgan Stanley has an “overweight” rating and $405 price target for CW stock, which closed at $487.70 on June 27.
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7 Best Defense Stocks to Buy Now originally appeared on usnews.com
Update 06/30/25: This story was published at an earlier date and has been updated with new information.
