The fiscal 2026 National Defense Authorization Act calls for $924.7 billion in U.S. military spending, up slightly from 2025 levels. However, the ongoing war in Ukraine, tensions between China and Taiwan, and conflicts involving Israel, the U.S., Iran and Hamas in the Middle East may force governments to increase defense industry investment in 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 of the best defense stocks to buy now, according to Morgan Stanley analysts:
| Stock | Implied Upside* |
| RTX Corp. (ticker: RTX) | 6.5% |
| General Dynamics Corp. (GD) | 11.1% |
| Northrop Grumman Corp. (NOC) | 7.1% |
| Howmet Aerospace Inc. (HWM) | 0.0% |
| TransDigm Group Inc. (TDG) | 14.5% |
| L3Harris Technologies Inc. (LHX) | 5.9% |
| Axon Enterprise Inc. (AXON) | 19.5% |
*Based on Jan. 16 closing price and Morgan Stanley price targets.
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 War. Analyst Kristine Liwag says the market doesn’t seem to fully appreciate RTX’s attractive valuation and growth opportunities. This rare combination makes RTX Liwag’s top stock pick within the aerospace group. Morgan Stanley has an “overweight” rating and $215 price target for RTX stock, which closed at $201.92 on Jan. 16.
General Dynamics Corp. (GD)
General Dynamics is a diversified aerospace and defense company that produces a wide range of products, including Gulfstream jets, Abrams tanks and nuclear submarines. The majority of the company’s revenue comes from the U.S. government, particularly its large contracts with the Department of War. Liwag says General Dynamics is reaching the end of a research and development period at Gulfstream that could lead to a period of margin expansion as deliveries of the G800 and other new models ramp. She also anticipates improved Marine segment margins. Morgan Stanley has an “overweight” rating and $408 price target for GD stock, which closed at $367.38 on Jan. 16.
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 Northrop’s portfolio is strongly aligned with the War Department’s needs, particularly when it comes to the Air Force’s B-21 Raider and Sentinel nuclear modernization programs. In fact, Liwag says Northrop is her top defense stock pick. Morgan Stanley has an “overweight” rating and $714 price target for NOC stock, which closed at $666.90 on Jan. 16.
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 positioned for margin expansion thanks to the company’s pricing power, strong market positioning and impressive execution. While the stock screens as relatively expensive based on its 2027 earnings multiple, Liwag says the premium valuation is more than justified given its technological advantages. Morgan Stanley has an “overweight” rating and $225 price target for HWM stock, which closed at $224.89 on Jan. 16.
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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 is a mature “growth at a reasonable price” aerospace investment that trades at a discounted valuation to competitors. She predicts TransDigm will continue to execute and deploy capital to special dividends, acquisitions and buybacks. Morgan Stanley has an “overweight” rating and $1,660 price target for TDG stock, which closed at $1,450 on Jan. 16.
L3Harris Technologies Inc. (LHX)
L3Harris Technologies is an aerospace and defense company focused on technology-driven mission solutions. The company’s leading defense products include airborne ISR (intelligence, surveillance and reconnaissance) and electronic warfare systems, precision-guided munitions and propulsion products, communication systems, integrated vision solutions, and space and missile defense technologies. Liwag says L3Harris had positive operating momentum heading into 2026 and is positioned to capitalize on the future of warfare, including Golden Dome opportunities, with its highly defensive portfolio. She says L3Harris’ revenue growth outlook through 2028 is particularly impressive. Morgan Stanley has an “overweight” rating and $367 price target for LHX stock, which closed at $346.46 on Jan. 16.
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’s exposure to key growth themes such as drones, artificial intelligence, and enterprise and international expansion will help the company grow its addressable market and maintain annual revenue growth in the 25%-to-30% range for the foreseeable future. Morgan Stanley has an “overweight” rating and $760 price target for AXON stock, which closed at $636.04 on Jan. 16.
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7 Best Defense Stocks to Buy Now originally appeared on usnews.com
Update 01/20/26: This story was published at an earlier date and has been updated with new information.
