Top Defense Stocks for Q1 2022

HII, RTX, and GD are top for value, growth, and momentum, respectively

The defense industry produces modern weaponry, including combat vehicles, ships, bombers, and fighter jets. Companies in the industry also offer cybersecurity, information technology (IT), analytics, robotics, and intelligence systems. Its primary customer is the U.S. government, but it also sells its products and services to foreign governments and law enforcement agencies. Large defense companies include Lockheed Martin Corp. (LMT), Raytheon Technologies Corp. (RTX), and Northrop Grumman Corp. (NOC).

The Invesco Aerospace & Defense ETF (PPA) holds a broad range of stocks, including some from companies that are not pure play defense companies, such as those involved in civilian aerospace manufacturing. However, it is the closest proxy available for the defense industry. PPA has slightly underperformed against the broader market with a total return of 7.09% over the last 12 months compared to the benchmark Russell 1000 Index’s total return of 9.68%.

Here are the top three defense stocks with the best value, the fastest growth, and the most momentum. The performance figures above and all statistics in the tables below are as of Feb. 23, 2022.

Best Value Defense Stocks

These are the defense stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.

Best Value Defense Stocks
  Price ($) Market Capitalization (Market Cap) ($B) 12-Month Trailing P/E Ratio
Northrop Grumman Corp. (NOC) 386.08 60.27 8.9
CACI International Inc. (CACI) 246.28 5.8 13.6
Huntington Ingalls Industries Inc. (HII) 187.39 7.5 13.9

Source: YCharts

  • Northrop Grumman Corp.: Northrop Grumman is a global security company that provides services and security systems to clients in the aerospace, information systems, and electronics industries, among others. Its products include manned and unmanned aircraft, as well electronic warfare systems. In November 2021, Northrop Grumman declared a quarterly dividend of $1.57 per share of common stock, payable Dec. 15, 2021, to shareholders of record as of Nov. 29, 2021.
  • CACI International Inc.: CACI International is a holding company that, through subsidiaries, offers expertise and technology in support of national security missions and government modernization and transformation. The company provides products including electronic warfare systems, unmanned aircraft system (UAS) tracking, cloud-powered solutions, network modeling, and software-as-a-service (SaaS) secure mobility. In mid-December 2021, the company announced that it has completed its acquisition of SA Photonics Inc., a provider of multi-domain photonics technologies for free-space optical (FSO) communications. CACI first announced in early November 2021 that it had agreed to acquire SA Photonics for total consideration of $275 million. On Jan. 11, 2022, CACI announced that it had been awarded a new five-year single-award task order to provide network modernization of outside plant infrastructure and facilities across major U.S. Army locations. The project is valued at up to $514 million.
  • Huntington Ingalls Industries Inc.: Huntington Ingalls is a shipbuilding company that designs, builds, and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. It also provides ship repair and maintenance services.

Fastest-Growing Defense Stocks

These are the top defense stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Fastest-Growing Defense Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Axon Enterprise Inc. (AXON) 122.44 8.4 N/A (see company description below) 39.4
Northrop Grumman Corp. (NOC) 386.08 60.3 762.4 -15.4
AeroVironment Inc. (AVAV) 56.93 1.4 11.1 31.7

Source: YCharts

  • Axon Enterprise Inc.: Axon Enterprises develops and manufactures security systems primarily for use in law enforcement. It offers tasers, sensors, on-officer body and in-car cameras, and software that is integrated with the devices. The company reported net income of $48.5 million for Q3 2021 compared with a net loss for the prior-year quarter, as revenue climbed by nearly 40% YOY. The company said that strength in international sales across product lines aided performance. Because EPS went from negative to positive, a YOY growth calculation for the table above is not possible.
  • Northrop Grumman Corp.: See company description above.
  • AeroVironment Inc.: AeroVironment designs and manufactures small unmanned aircraft as well as fast-charge systems for electric industrial vehicle batteries. The company also sells antennae, sensors, and missile systems to customers in the United States.

Defense Stocks with the Most Momentum

These are the defense stocks that had the highest total return over the last 12 months.

Defense Stocks with the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
General Dynamics Corp. (GD) 216.27 60.1 32.4
Northrop Grumman Corp. (NOC) 386.08 60.3 31.6
Raytheon Technologies Corp. (RTX) 47.20 3.5 37.9
Russell 1000 N/A N/A 9.7
Invesco Aerospace & Defense ETF (PPA) N/A N/A 7.1

Source: YCharts

  • General Dynamics Corp.: General Dynamics is an aerospace and defense company. It offers ship construction and repair services, land combat vehicles, weapons systems, munitions, and various technology products and services.
  • Northrop Grumman Corp.: See company description above.
  • Raytheon Technologies Corp.: Raytheon Technologies is an aerospace and defense company. It provides advanced systems and services for commercial, government, and military customers. For the third quarter (Q3) of 2021, the company’s net income surged by more than 800% on 10% increase in sales YOY. Net income was significantly impacted by $496 million of acquisition accounting adjustments and net significant and/or nonrecurring charges.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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  1. YCharts. “Financial Data.”

  2. Northrop Grumman, Investor Home. “Northrop Grumman Board Declares Quarterly Dividend.”

  3. CACI International, Investor Relations, News. “CACI Completes Acquisition of SA Photonics.”

  4. CACI International, Investor Relations, News. “CACI Enters Agreement to Acquire SA Photonics, Inc.

  5. CACI International, Investor Relations, News. “CACI Wins $514 Million Task Order to Modernize U.S. Army Networks.”

  6. Huntington Ingalls Industries, Investor Relations. “Huntington Ingalls Industries Reports Third Quarter 2021 Results.”

  7. Axon Enterprise, Investor Relations. “Q3 2021: To Our Shareholders,” Pages 8, 23, and 26.

  8. Raytheon Technologies, News. “Raytheon Technologies Reports Third Quarter 2021 Results; Raises 2021 Adjusted EPS Outlook.”

  9. AeroVironment, Investor Relations. “AeroVironment, Inc. Announces Second Quarter Results and Resets Guidance for Fiscal 2022.”

  10. General Dynamics, Investor Relations. “General Dynamics Reports Third-Quarter 2021 Financial Results.”

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