The defense sector offers investors a rare combination of geopolitical demand, government fiscal commitment, and multi-year revenue visibility all working simultaneously.
President Trump has called for a military budget of $1.5 trillion for fiscal year 2027, well above the Department of War’s existing investment request of $756.8 billion.
Goldman Sachs argues that economic security will be a prominent theme in 2026, with NATO defense commitments and reindustrialization creating substantial opportunities for active managers.
Three publicly traded defense companies anchor that thesis, each carrying strong backlogs, recent contract wins, and identifiable risks heading into second-quarter earnings season.
**Lockheed Martin (NYSE: LMT)**
Lockheed Martin trades at $545.70 as of July 2, up nearly 8% over the past month, with a forward price-to-earnings ratio of 17 and a dividend yield of 3%.
The company ended 2025 with a record $194 billion backlog, representing more than 2.5 years of sales, which underpins management’s FY2026 guidance of $77.5 to $80.0 billion in revenue.
The Department of War signed multi-year framework agreements to scale Patriot, THAAD, and PrSM production by three to four times current rates, and Lockheed secured a $4.8 billion PAC-3 missile production contract.
CEO Jim Taiclet said the year’s start “reinforces our confidence in Lockheed Martin’s continued operational and financial growth in the year ahead.”
The primary risk is fixed-price contract execution, illustrated by a $125 million F-16 unfavorable profit adjustment that caused Q1 2026 EPS of $6.44 to miss the $6.70 consensus estimate.
**Northrop Grumman (NYSE: NOC)**
Northrop Grumman is down 12% year-to-date to $504.60, but analysts carry an average price target of $695.05, implying substantial recovery upside from current levels.
Q1 2026 results were notably strong, with EPS of $6.14 beating the $6.06 estimate, revenue growing 4% to $9.88 billion, and net income climbing 82% year-over-year.
The B-21 Raider program swung from a $183 million operating loss to $305 million in operating income, a turnaround that should compound as production scales further.
On May 20, 2026, ten Northrop directors purchased 349 shares each at $552.17, a coordinated insider buy signaling strong boardroom conviction in the stock’s recovery.
CEO Kathy Warden described the quarter as reflecting “our ability to deliver in today’s unprecedented global demand environment,” with backlog standing at $95.61 billion and a 1.10 book-to-bill ratio.
The key risk is that the B-21 low-rate initial production program still carries the memory of a $477 million loss provision, and government shutdown risk is explicitly excluded from guidance.
**RTX Corp (NYSE: RTX)**
RTX is the only one of the three companies to raise full-year guidance following Q1 results, and its stock reflects that momentum, trading at $188.54 and up 32% over the past year.
Q1 2026 adjusted EPS of $1.78 beat the $1.52 consensus estimate by 17%, marking the eighth consecutive quarterly beat and giving management the confidence to lift its full-year outlook.
RTX now guides for FY2026 adjusted sales of $92.5 to $93.5 billion and adjusted EPS of $6.70 to $6.90, with a $271 billion backlog split between commercial and defense segments.
Recent contract wins include a $1.1 billion U.S. Navy AIM-9X contract and a $515 million SPY-6 radar contract, reinforcing broad demand across RTX’s portfolio.
CEO Chris Calio cited “organic sales and adjusted operating profit growth across all three segments” as the primary driver behind the raised guidance.
The Pratt and Whitney powder metal matter requiring accelerated GTF fleet inspections remains a multi-year cash drag, and tariff exposure across Collins and Pratt units warrants continued monitoring.
With the three companies’ backlogs collectively approaching $560 billion and defense budget trajectories pointing firmly higher, second-quarter earnings in late July will test whether operational momentum holds across all three names.
