Aerospace-Defense Sector Stock Rankings: Q2 2026

Methodology

Scores reflect a composite of revenue scale, profitability metrics, margin efficiency, program diversity, and macro defensive positioning. Sector-adjusted percentiles applied across eight large-cap and mid-cap names.

---

Ranked List

1. RTX (Raytheon Technologies) — $176.00 | Score: 78

Recommendation: Overweight

RTX claims the sector's top position with a compelling combination of scale ($88.6B revenue), profitability ($6.7B net income), and business diversity. The Collins Aerospace and Pratt & Whitney franchises provide unmatched exposure to both defense modernization and commercial aviation recovery. Defense electronics (radar, electronic warfare, missile systems) offer steady growth, while the commercial aerospace cycle provides upside optionality. RTX's cost discipline and portfolio optimization initiatives have improved operating margins, and free cash flow generation supports capital returns and M&A optionality.

Key Catalysts: Collins commercial recovery pace, defense electronics order flow, Pratt & Whitney engine margin improvement

---

2. Lockheed Martin (LMT) — $506.51 | Score: 72

Recommendation: Overweight

LMT remains a foundational holding in aerospace-defense, anchored by the F-35 Lightning II program — the Western world's flagship multi-role fighter with strong international order backlogs. FY2025 revenue of $75B with 10.3% operating margins demonstrates operational excellence. The company's capital return program (dividends + buybacks) provides shareholder-friendly cash deployment. Defense budget resilience and program stability make LMT a quality core holding.

Key Catalysts: F-35 production ramp, international contract announcements, space program wins

---

3. Northrop Grumman (NOC) — $549.52 | Score: 68

Recommendation: Overweight

NOC's positioning in space systems, stealth platforms (B-21 Raider), and missile defense provides exposure to the highest-priority defense modernization areas. FY2025 operating margins of 10.7% reflect the premium pricing power of critical capability providers. Revenue of $42B with net income of $4.2B demonstrates efficient conversion. The company continues to demonstrate program execution discipline in sensitive defense categories.

Key Catalysts: B-21 production scaling, space surveillance contracts, hypersonic program progress

---

4. General Dynamics (GD) — $345.51 | Score: 65

Recommendation: Overweight

GD offers a well-diversified defense portfolio spanning marine systems (Virginia-class submarines, Arleigh Burke destroyers), combat vehicles, and information technology/services. The company's Gulf Coast shipbuilding presence positions it favorably for naval budget allocation. FY2025 revenue of $52.6B with $4.2B net income reflects consistent execution. Operating margins of 10.2% demonstrate efficient program management.

Key Catalysts: Submarine delivery cadence, IT services contract wins, Gulf Coast shipbuilding trajectory

---

5. Howmet Aerospace (HWM) — $272.07 | Score: 64

Recommendation: Overweight

HWM stands out with the sector's highest operating margins at 24.8% — exceptional for an aerospace components supplier. At only $8.3B revenue, the company generates operating income that rivals peers twice its size. HWM provides leverage to the aerospace upcycle without the capital intensity of prime contractors. The company serves both commercial and defense customers across engine components, structural parts, and fastening systems. Margin expansion story and operational efficiency make HWM an attractive quality play.

Key Catalysts: Commercial engine component demand, defense spending durability, margin expansion trajectory

---

6. Boeing (BA) — $238.36 | Score: 58

Recommendation: Market Perform

BA presents a recovery narrative with improving fundamentals but persistent execution risk. FY2025 revenue expanded to $89.5B — a significant rebound — but operating margins of 4.8% and net income of $2.2B highlight the efficiency gap versus peers. The 737 MAX program's resolution and 787 production rate increases provide forward optionality. However, the balance sheet restoration remains ongoing, and key program execution uncertainty keeps BA lower in rankings despite improved top-line trajectory.

Key Catalysts: 737 MAX delivery normalization, 787 production rate increases, defense program wins

---

7. L3Harris Technologies (LHX) — $299.64 | Score: 55

Recommendation: Market Perform

LHX occupies a middle tier in the sector, with FY2025 revenue of $21.3B and net income of $1.6B. The merger integration of L3 and Harris has created a communications and electronics portfolio, but the combined entity still faces margin optimization challenges. Operating margins at 9.9% trail sector leaders. LHX provides solid defense electronics exposure but lacks the diversification or program premium of top-tier peers.

Key Catalysts: Integration synergies realization, defense electronics order pace, space communications wins

---

8. Axon Enterprise (AXON) — $403.54 | Score: 42

Recommendation: Underweight

AXON represents the sector's speculative tier at $2.8B revenue. The company is essentially a software/Taser's provider for law enforcement rather than a traditional defense contractor. FY2025 showed negative operating income (-$62M) reflecting heavy investment in growth and R&D. While the public safety software suite represents an interesting niche, the valuation ($403.54 price point) appears stretched relative to current fundamentals. Not a core aerospace-defense holding.

Key Catalysts: Law enforcement budget trends, Software-as-a-Service revenue retention, international expansion

---

Sector Summary

---

Key Observations

1. RTX leads with diversification: The only name with meaningful exposure to both defense and commercial aerospace at scale 2. HWM has best margins: 24.8% operating margin demonstrates aerospace components' attractive economics 3. BA recovery has limits: Despite revenue recovery to $89.5B, profitability lags peers significantly 4. AXON is misclassified: More law enforcement tech than true aerospace-defense; valuation is a concern

---

Scores updated as of 2026-05-10 12:00 UTC. Financial data from latest SEC filings. For informational purposes only. Not investment advice.