The fiscal 2026 National Defense Authorization Act calls for $924.7 billion in U.S. military spending, up slightly from 2025 levels. The ongoing war in Ukraine, tensions between China and Taiwan, and conflict between Israel 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 Potential From Aug. 28 Close |
| RTX Corp. (ticker: RTX) | 12.0% |
| Lockheed Martin Corp. (LMT) | 16.1% |
| Northrop Grumman Corp. (NOC) | 6.3% |
| TransDigm Group Inc. (TDG) | 25.1% |
| Howmet Aerospace Inc. (HWM) | 19.2% |
| Axon Enterprise Inc. (AXON) | 13.1% |
| Curtiss-Wright Corp. (CW) | 16.2% |
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 has a compelling valuation relative to peers and is experiencing strong demand across its end markets. RTX is her top overall stock pick in the aerospace industry. Morgan Stanley has an “overweight” rating and $180 price target for RTX stock, which closed at $160.66 on Aug. 28.
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 and Seahawk military helicopters. Liwag says the $1.6 billion in program charges and $169 million in other charges Lockheed reported in the second quarter spooked investors, but this pure-play defense stock represents a tremendous value for long-term investors. Morgan Stanley has an “overweight” rating and $530 price target for LMT stock, which closed at $456.18 on Aug. 28.
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, as well as other military and intelligence mission solutions. Liwag says government spending on the B-21 Raider and E-2D programs position Northrop for expanding margins and accelerating revenue growth. She says the company has the most attractive defense portfolio and is her top stock pick in the defense industry. Morgan Stanley has an “overweight” rating and $625 price target for NOC stock, which closed at $587.90 on Aug. 28.
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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 TransDigm’s recent weakness is a buying opportunity given the growth outlook for the company’s commercial aftermarket and defense end markets. She says TransDigm offers investors the best value among commercial aircraft aftermarket product manufacturers. Morgan Stanley has an “overweight” rating and $1,750 price target for TDG stock, which closed at $1,398.06 on Aug. 28.
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’s impressive earnings beat and guidance hike in the second quarter highlight the company’s revenue, operating cash flow and operating margin momentum. She says Howmet has proven itself to be a high-quality supplier with a world-class management team and significant exposure to secular growth themes. Morgan Stanley has an “overweight” rating and $210 price target for HWM stock, which closed at $176.16 on Aug. 28.
Axon Enterprise Inc. (AXON)
Axon Enterprise is a law enforcement hardware and technology solutions provider. In addition to supplying body-worn cameras and virtual reality training to law enforcement, Axon’s military products include military body-worn cameras, drone technology, in-vehicle camera systems and digital management platforms. Analyst Meta Marshall says Axon has a massive addressable market outside U.S. state and local law enforcement, which should help the company maintain revenue growth in the high 20% range for the foreseeable future. Marshall is particularly bullish on the Axon Fusus real-time crime center platform. Morgan Stanley has an “overweight” rating and $885 price target for AXON stock, which closed at $781.90 on Aug. 28.
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 defense segment is positioned to meet accelerating demand in Europe, which has pushed defense electronics margins to new highs. In addition, she says the Donald Trump administration’s recent commitment to build 10 new large-scale nuclear reactors supports demand for Curtiss-Wrights nuclear technology. Morgan Stanley has an “overweight” rating and $565 price target for CW stock, which closed at $485.89 on Aug. 28.
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7 Best Defense Stocks to Buy Now originally appeared on usnews.com
Update 08/29/25: This story was published at an earlier date and has been updated with new information.
