The fiscal 2026 National Defense Authorization Act calls for $924.7 billion in U.S. defense spending, up slightly from 2025 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 six defense stocks to buy with big upside potential, according to Morgan Stanley:
| Stock | Upside Potential From July 30 Close |
| RTX Corp. (ticker: RTX) | 13.6% |
| Lockheed Martin Corp. (LMT) | 26.5% |
| TransDigm Group Inc. (TDG) | 7.9% |
| Howmet Aerospace Inc. (HWM) | 9.2% |
| Northrop Grumman Corp. (NOC) | 29.0% |
| Curtiss-Wright Corp. (CW) | 10.8% |
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 services for the U.S. intelligence community and the Department of Defense. Analyst Kristine Liwag says RTX trades at a steep discount to its peer group, and she says that attractive valuation makes RTX her top stock pick in the aerospace industry. Morgan Stanley has an “overweight” rating and $180 price target for RTX stock, which closed at $158.40 on July 30.
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 a classified program within the aeronautics segment was largely responsible for a surprise $1.6 billion pre-tax charge in the second quarter, but she says Lockheed’s stock is simply too cheap to ignore. Morgan Stanley has an “overweight” rating and $530 price target for LMT stock, which closed at $418.68 on July 30.
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 commercial aftermarket demand has been strong, and bookings trends have been positive. In addition, she says TransDigm’s balance sheet is healthy enough for the company to deploy significant capital via buybacks, acquisitions or special dividends. Morgan Stanley has an “overweight” rating and $1,750 price target for TDG stock, which closed at $1,620.83 on July 30.
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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 price hikes, market share growth and content gains in airfoils from new products should position Howmet to outgrow the overall aerospace and defense industry in the coming years. She says the company’s engine products business also has superior technology relative to competitors. Morgan Stanley has an “overweight” rating and $210 price target for HWM stock, which closed at $192.14 on July 30.
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 revenue growth is accelerating and its margins are improving. The U.S. Air Force is also investing heavily in B-21 bomber production. Liwag says Northrop’s positive momentum and best-in-breed defense portfolio make it her top overall defense stock pick. Morgan Stanley has an “overweight” rating and $625 price target for NOC stock, which closed at $484.37 on July 30.
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’s valuation may not look particularly attractive at first glance, but she says the company’s strong execution and exposure to high-growth markets such as commercial nuclear energy will continue to fuel outperformance. She also sees significant opportunities for AP1000 nuclear power plants in Europe. Morgan Stanley has an “overweight” rating and $550 price target for CW stock, which closed at $496.30 on July 30.
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6 Best Defense Stocks to Buy Now originally appeared on usnews.com
Update 07/31/25: This story was published at an earlier date and has been updated with new information.
