The defense industry provides modern weaponry, combat vehicles, ships, and fighter jets. They also offer cyber security, information technology (IT), analytics, robotics, and intelligence systems. Some big defense companies include Lockheed Martin Corp. (LMT), Raytheon Technologies Corp. (RTX), and Northrop Grumman Corp. (NOC). The industry provides security and defense solutions primarily for the U.S. military, but also for law enforcement agencies and foreign governments. Some defense companies have experienced delays and disruptions due to the impact of the COVID-19 pandemic.
Defense stocks are best represented by the Invesco Aerospace & Defense ETF (PPA) in the aerospace industry that are not entirely based on defense. While it may not perfectly reflect the defense industry, there is significant overlap between the two industries. PPA has dramatically underperformed the broader market. It has provided a total return of -16.0% over the past 12 months, well below the Russell 1000's total return of 13.7%, as of September 22, 2020. All statistics in the tables below are as of September 23.
Here are the top 3 defense stocks with the best value, the fastest earnings growth, and the most momentum.
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 you’re paying less for each dollar of profit generated.
|Best Value Defense Stocks|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E Ratio|
|Maxar Technologies Inc. (MAXR)||27.66||1.7||6.2|
|Huntington Ingalls Industries Inc. (HII)||143.61||5.8||11.2|
|General Dynamics Corp. (GD)||139.45||40.0||12.4|
- Maxar Technologies Inc.: Maxar Technologies is a space technology company. It provides satellite telecommunication services, robotics, Earth imagery, geospatial data, analytics, and insights. The company recently announced that it was awarded a contract valued at up to $49 million over eight years and two initial task orders worth a combined $8 million to provide multiple tactical ground systems for the U.S. Army Geospatial Center.
- Huntington Ingalls Industries Inc.: Huntington Ingalls is a shipbuilding company. It designs, builds, and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. The company also develops non-nuclear ships, assault ships, and provides various professional services, including fleet support, oil and gas services, and more. Huntington Ingalls reported a 58.6% decline in net earnings as revenue fell 7.4% in Q2 2020, which ended June 30, 2020. The company said that declines in the quarter were partly due to delays and disruptions related to the impact of the pandemic.
- General Dynamics Corp.: General Dynamics, one of the nation's primary builders of nuclear-powered submarines for the U.S. Navy, is an aerospace and defense company that offers aviation, combat vehicles, weapons systems, munitions, shipbuilding design and construction, information systems, and technologies.
Fastest Growing Defense Stocks
These are the defense stocks with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
|Fastest Growing Defense Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)|
|Maxar Technologies Inc. (MAXR)||27.66||1.7||100.0|
|Mercury Systems Inc. (MRCY)||76.79||4.3||96.0|
|ManTech International Corp. (MANT)||71.41||2.9||23.3|
- Maxar Technologies Inc.: See above for company description.
- Mercury Systems Inc.: Mercury Systems is a multinational aerospace and defense technology company that provides a range of critical defense and intelligence programs. Revenue grew 22.8% to a record $217.4 million in Q4 of its 2020 fiscal year (FY), the three-month period ended July 3, 2020. Net income also reached a new quarterly record, rising 112.6%. The boost to net income was aided by factors including lower interest expenses and higher non-operating income compared to the year-ago quarter.
- ManTech International Corp.: ManTech International provides IT and technical services solutions to the U.S. federal government. It offers cyber security, software and systems development, enterprise IT, multi-disciplined intelligence, program protection and mission assurance, system engineering, and more. The company reported net income growth of 23.6% on revenue growth of 17.8% in Q2 2020, which ended June 30, 2020.
Defense Stocks with the Most Momentum
These are the defense stocks that had the highest total return over the last 12 months.
|Defense Stocks with the Most Momentum|
|Market Cap ($B)||12-Month Trailing Total Return (%)|
|Maxar Technologies Inc. (MAXR)||27.66||1.7||204.9|
|Axon Enterprise Inc. (AAXN)||86.88||5.5||36.7|
|Leidos Holdings Inc. (LDOS)||91.60||13.0||7.7|
|Invesco Aerospace & Defense ETF (PPA)||N/A||N/A||-16.0|
- Maxar Technologies Inc.: See above for company description.
- Axon Enterprise Inc.: Axon Enterprises develops and manufactures security systems. It offers law enforcement, military, and defense solutions.
- Leidos Holdings Inc.: Leidos Holdings is a global science and technology company engaged in the provision of scientific, engineering, systems integration, and technical services and solutions in the areas of national security, engineering, and health. The company reported net income growth of 11.6% on revenue growth of 6.8% in Q2 2020, which ended July 3, 2020. Leidos noted that COVID-19 adversely impacted revenue and operating income by about $132 million and $68 million, respectively.
YCharts. "Financial Data." Accessed Sep. 23, 2020.
Maxar Technologies Inc. "Maxar Selected to Deliver Portable Satellite Imagery Ground Systems to U.S. Army." Accessed Sep. 23, 2020.
Huntington Ingalls Industries Inc. "Huntington Ingalls Industries Reports Second Quarter 2020 Results, Provides COVID-19 Update and Updates 2020 Outlook." Accessed Sep. 23, 2020.
Mercury Systems Inc. "Mercury Systems Reports Fourth Quarter and Fiscal Year 2020 Results." Accessed Sep. 23, 2020.
ManTech International Corp. "MANTECH ANNOUNCES FINANCIAL RESULTS FOR SECOND QUARTER OF 2020." Accessed Sep. 23, 2020.
Leidos Holdings Inc. "Leidos Holdings, Inc. Reports Second Quarter Fiscal Year 2020 Results." Accessed Sep. 23, 2020.