Geopolitical tensions have intensified recently, notably with the ongoing Russia-Ukraine conflict and rising tensions in the Middle East involving Israel and Iran. These developments have rekindled investor interest in defense stocks. Analysts from Wall Street are evaluating three major players in the defense sector—Lockheed Martin, RTX Corporation, and Northrop Grumman—to determine which stock may yield the best returns amid this favorable backdrop.
Lockheed Martin (NYSE:LMT)
As a leader in the aerospace and defense industry, Lockheed Martin generated approximately $71 billion in revenue last year across its various sectors, including Aeronautics and Space. However, the stock faced some pressure recently due to reports that the U.S. Department of Defense has reduced its F-35 jet procurement request for this year from 48 to 24 units.
Despite this setback, many analysts maintain a positive outlook on Lockheed Martin, highlighting its diverse revenue sources and a substantial backlog of around $173 billion, representing over two years of sales. The company recently signed a Memorandum of Understanding (MoU) with Korea Aerospace Industries, expanding their partnership. Consequently, Lockheed’s stock saw a 3% increase.
Truist Securities analyst Michael Ciarmoli reaffirmed a Buy rating with a price target of $579, noting that despite short-term risks related to the F-35 program—which constitutes a significant portion of Lockheed’s revenue—the challenges in securing Congressional approval for budget cuts present a buffer against drastic impacts.
Overall, Lockheed Martin holds a Moderate Buy consensus rating from analysts, with an average price target of $521.07 indicating an upside of about 11.2%.
RTX Corporation (NYSE:RTX)
RTX Corporation, formerly known as Raytheon Technologies, serves a diverse market through Collins Aerospace, Pratt & Whitney, and Raytheon. The stock has surged over 39% in the past year, fueled by strong performance metrics and a recovery in aviation spending. The company boasts a robust backlog of $217 billion.
However, RTX has warned investors about the potential negative impact of tariffs, which could result in an $850 million hit to its 2025 operating profit. Analyst Sheila Kahyaoglu from Jefferies raised the stock’s price target to $155 while keeping a Hold rating, reflecting concerns about certain uncertainties but also recognizing potential revenue growth from Raytheon’s defense division.
RTX holds a Moderate Buy consensus rating, with an average price target of $140.33.
Northrop Grumman (NYSE:NOC)
While Northrop Grumman faced disappointment with its Q1 2025 results and a downward revision of full-year earnings guidance—primarily due to mounting costs associated with the B-21 stealth bomber—it remains optimistic about long-term growth, supported by a strong backlog of $92.8 billion.
Analyst Gavin Parsons from UBS decreased his price target slightly to $571 but retained a Buy rating, emphasizing that while the short-term outlook appears challenging, the company’s backlog presents significant growth possibilities. Northrop boasts a Moderate Buy consensus rating, with an average price target of $541.36, suggesting a 9.4% upside potential.
In conclusion, while there are risks associated with each of the defense stocks reviewed, analysts express a cautiously optimistic view on the sector as geopolitical tensions continue to underscore the demand for defense capabilities. Lockheed Martin may offer slightly more favorable returns at present, with its diversified operations and substantial backlog positioning it well in the defense market.
This analysis indicates a resilient future for defense contractors as they navigate current challenges while capitalizing on opportunities sustained by geopolitical dynamics.