As geopolitical tensions continue to rise globally, the defense sector remains a critical area of investment. The fiscal 2025 National Defense Authorization Act calls for $923.3 billion in U.S. military spending, up 4.1% from 2024 levels. This increase, coupled with ongoing conflicts and rising defense budgets, makes defense stocks an attractive investment opportunity. Here are five defense stocks to watch in 2025:
- 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. In 2023, 72% of the company’s revenue came from the U.S. government. Analysts are bullish on General Dynamics’ outlook due to its healthy balance sheet and positive outlook for Gulfstream demand. Morgan Stanley has an “overweight” rating and a $345 price target for GD stock. - Northrop Grumman Corp. (NOC)
Northrop Grumman is one of the world’s largest weapons and military technology producers. The company’s 2025 preliminary guidance suggests another solid year ahead, including 3% to 4% revenue growth and 24.5% free cash flow growth. Northrop Grumman is highly exposed to key Department of Defense investment priorities, including autonomy and nuclear modernization. Morgan Stanley has an “overweight” rating and a $605 price target for NOC stock. - TransDigm Group Inc. (TDG)
TransDigm designs and manufactures original aircraft parts sold to manufacturers and aftermarket replacement parts sold to commercial and military aircraft operators. The company has announced several significant buyouts in the past year, including acquiring SEI Industries, Raptor Scientific, and the components and subsystems business of Communications & Power Industries1. TransDigm’s 2025 revenue growth is projected to reach 11.5% and net income growth of 13.3% - Science Applications International Corporation (SAIC)
SAIC has secured lucrative contracts with the military and NASA, including a notable $229 million deal for the modernization of NORAD IT resources. Citigroup has a “Buy” rating for SAIC, with a price target of $1762. The company’s stock has seen a 14.57% year-to-date increase. - L3Harris Technologies (LHX)
L3Harris Technologies has managed to secure a $587 million Navy contract for electronic warfare systems and a 5-year “indefinite delivery, indefinite quantity” contract for advanced artillery shell fuses. Citigroup has raised its price target for LHX to $291, citing rising defense budgets in Europe and additional spending bills in the U.S2. The company’s stock has increased by 15.53% year-to-date.
OUTLOOK FOR 2025
The outlook for defense stocks in 2025 remains strong due to several factors. The ongoing war in Ukraine, tensions between China and Taiwan, and conflicts in the Middle East are expected to drive increased defense spending. Additionally, the U.S. government’s focus on modernization and technological advancements in defense will provide a tailwind for the sector.
Investors should keep an eye on these top defense stocks as they navigate the evolving geopolitical landscape. With strong government contracts and a supportive industry backdrop, these companies are well-positioned to deliver solid returns in 2025.
