7 Best Defense Stocks for 2025
7 Best Defense Stocks for 2025
The fiscal 2025 National Defense Authorization Act (NDAA) calls for $923.3 billion in U.S. military spending, up 4.1% from 2024 levels. However, the ongoing war in Ukraine, tensions between China and Taiwan, and conflicts between Israel and Iran, Hezbollah and Hamas in the Middle East may force the U.S. government to increase defense industry investment even more in the coming years, which could serve as a tailwind for defense sector earnings.
Defense stocks are attractive investments because they often have predictable, long-term government contracts. Here are seven defense stocks to buy with big upside potential, according to Morgan Stanley:
StockUpside potential from April 1
TransDigm Group Inc. (ticker: TDG)12.7%
General Dynamics Corp. (GD)14.9%
Northrop Grumman Corp. (NOC)13.0%
Howmet Aerospace Inc. (HWM)17.6%
Axon Enterprise Inc. (AXON)29.3%
Curtiss-Wright Corp. (CW)25.6%
Embraer SA (ERJ)-2.9%
Defense stocks are attractive investments because they often have predictable, long-term government contracts. Here are seven defense stocks to buy with big upside potential, according to Morgan Stanley:
StockUpside potential from April 1
TransDigm Group Inc. (ticker: TDG)12.7%
General Dynamics Corp. (GD)14.9%
Northrop Grumman Corp. (NOC)13.0%
Howmet Aerospace Inc. (HWM)17.6%
Axon Enterprise Inc. (AXON)29.3%
Curtiss-Wright Corp. (CW)25.6%
Embraer SA (ERJ)-2.9%
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Re: 7 Best Defense Stocks for 2025
TransDigm Group Inc. (TDG)
TransDigm designs and manufactures original aircraft parts that are 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. Analyst Kristine Liwag says TransDigm will enjoy a strong pricing environment and a positive aftermarket demand backdrop in 2025. Liwag says TransDigm will also soon start benefiting from its latest manufacturing contract with Boeing Co. (BA). Morgan Stanley has an "overweight" rating and $1,575 price target for TDG stock, which closed at $1,397.44 on April 1.
TransDigm designs and manufactures original aircraft parts that are 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. Analyst Kristine Liwag says TransDigm will enjoy a strong pricing environment and a positive aftermarket demand backdrop in 2025. Liwag says TransDigm will also soon start benefiting from its latest manufacturing contract with Boeing Co. (BA). Morgan Stanley has an "overweight" rating and $1,575 price target for TDG stock, which closed at $1,397.44 on April 1.
Re: 7 Best Defense Stocks for 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. The majority of the company's revenue comes from the U.S. government, particularly its large contracts with the Department of Defense. Liwag says General Dynamics' 2025 guidance is likely overly conservative given that the company's initial G700 headwinds are now in the rearview mirror. She says the company's combat segment will support overall margins now that new ammunition production capacity has come online. Morgan Stanley has an "overweight" rating and $315 price target for GD stock, which closed at $274.14 on April 1.
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 Defense. Liwag says General Dynamics' 2025 guidance is likely overly conservative given that the company's initial G700 headwinds are now in the rearview mirror. She says the company's combat segment will support overall margins now that new ammunition production capacity has come online. Morgan Stanley has an "overweight" rating and $315 price target for GD stock, which closed at $274.14 on April 1.
Re: 7 Best Defense Stocks for 2025
Northrop Grumman Corp. (NOC)
Northrop Grumman is one of the world's largest weapons and military technology producers. Liwag says Northrop management is seemingly fine-tuning its defense systems segment to focus on missile and missile defense capability by pruning its portfolio and realigning its investment priorities. She says Northrop's missile business is particularly appealing to international customers dealing with global threats. Liwag projects Northrop will generate roughly double-digit percentage growth in international sales in 2025, supported by elevated demand for C2 aircraft and Airborne ISR (intelligence, surveillance and reconnaissance) aircraft. Morgan Stanley has an "overweight" rating and $580 price target for NOC stock, which closed at $513.10 on April 1.
Northrop Grumman is one of the world's largest weapons and military technology producers. Liwag says Northrop management is seemingly fine-tuning its defense systems segment to focus on missile and missile defense capability by pruning its portfolio and realigning its investment priorities. She says Northrop's missile business is particularly appealing to international customers dealing with global threats. Liwag projects Northrop will generate roughly double-digit percentage growth in international sales in 2025, supported by elevated demand for C2 aircraft and Airborne ISR (intelligence, surveillance and reconnaissance) aircraft. Morgan Stanley has an "overweight" rating and $580 price target for NOC stock, which closed at $513.10 on April 1.
Re: 7 Best Defense Stocks for 2025
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 the market leader in supplying industrial gas turbine (IGT) blades crucial to power production. She says Howmet will benefit from strong demand in the commercial airline aftermarket and sales growth in spare engine parts. Finally, Howmet's 2025 financial guidance is likely overly conservative. Morgan Stanley has an "overweight" rating and $155 price target for HWM stock, which closed at $131.78 on April 1.
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 the market leader in supplying industrial gas turbine (IGT) blades crucial to power production. She says Howmet will benefit from strong demand in the commercial airline aftermarket and sales growth in spare engine parts. Finally, Howmet's 2025 financial guidance is likely overly conservative. Morgan Stanley has an "overweight" rating and $155 price target for HWM stock, which closed at $131.78 on April 1.
Re: 7 Best Defense Stocks for 2025
Axon Enterprise Inc. (AXON)
Axon Enterprise is a law enforcement hardware and technology solutions provider. In addition to supplying body-worn cameras and other hardware to law enforcement and military customers, Axon also provides training and cloud-based software services such as digital evidence management. Analyst Meta Marshall says Axon's stock is not cheap from a valuation perspective, but the company has plenty of positive momentum and impressive fundamental business trends. Marshall says software and artificial intelligence offerings will help Axon maintain its recent 25% to 30% revenue growth rate. Morgan Stanley has an "overweight" rating and $700 price target for AXON stock, which closed at $541.20 on April 1.
Axon Enterprise is a law enforcement hardware and technology solutions provider. In addition to supplying body-worn cameras and other hardware to law enforcement and military customers, Axon also provides training and cloud-based software services such as digital evidence management. Analyst Meta Marshall says Axon's stock is not cheap from a valuation perspective, but the company has plenty of positive momentum and impressive fundamental business trends. Marshall says software and artificial intelligence offerings will help Axon maintain its recent 25% to 30% revenue growth rate. Morgan Stanley has an "overweight" rating and $700 price target for AXON stock, which closed at $541.20 on April 1.
Re: 7 Best Defense Stocks for 2025
Curtiss-Wright Corp. (CW)
Curtiss-Wright provides specialized solutions, engineered products and other services primarily to the aerospace and defense markets. The company's defense electronics segment includes products such as commercial off-the-shelf embedded computing board-level modules, integrated subsystems, and data acquisition and flight test instrumentation equipment. Liwag says Curtiss-Wright's business is well aligned with Department of Defense priorities, and the company is optimistic about its commercial nuclear opportunities. Liwag anticipates initial AP1000 nuclear reactor orders from Poland by the end of 2026, with Bulgaria and Ukraine potentially following suit. Morgan Stanley has an "overweight" rating and $405 price target for CW stock, which closed at $322.46 on April 1.
Curtiss-Wright provides specialized solutions, engineered products and other services primarily to the aerospace and defense markets. The company's defense electronics segment includes products such as commercial off-the-shelf embedded computing board-level modules, integrated subsystems, and data acquisition and flight test instrumentation equipment. Liwag says Curtiss-Wright's business is well aligned with Department of Defense priorities, and the company is optimistic about its commercial nuclear opportunities. Liwag anticipates initial AP1000 nuclear reactor orders from Poland by the end of 2026, with Bulgaria and Ukraine potentially following suit. Morgan Stanley has an "overweight" rating and $405 price target for CW stock, which closed at $322.46 on April 1.
Re: 7 Best Defense Stocks for 2025
Embraer SA (ERJ)
Brazil-based Embraer is one of the world's top regional commercial aircraft manufacturers. The company also makes private planes and military aircraft, including the Tucano single-engine pilot training and light attack aircraft. Liwag says Embraer is entering a sustainable growth period. She says key catalysts for the stock include additional orders for the company's C-390 Millennium military transport aircraft and E2 commercial jet, a potential reinstatement of the stock's dividend and even the possible launch of a new commercial aircraft model to compete with Boeing and Airbus. Morgan Stanley has an "overweight" rating and $45 price target for ERJ stock, which closed at $46.34 on April 1.
Brazil-based Embraer is one of the world's top regional commercial aircraft manufacturers. The company also makes private planes and military aircraft, including the Tucano single-engine pilot training and light attack aircraft. Liwag says Embraer is entering a sustainable growth period. She says key catalysts for the stock include additional orders for the company's C-390 Millennium military transport aircraft and E2 commercial jet, a potential reinstatement of the stock's dividend and even the possible launch of a new commercial aircraft model to compete with Boeing and Airbus. Morgan Stanley has an "overweight" rating and $45 price target for ERJ stock, which closed at $46.34 on April 1.