3 Defense Equipment Stocks to Buy Amid Valuable M&As

Aerospace-Defense Equipment stocks are poised to gain from strategic mergers and acquisitions, such as recent deals by TransDigm and Teledyne that enhance operational scale, diversify product offerings and expand market presence. However, persistent supply-chain challenges continue to constrain aircraft deliveries and parts availability, which may pressure production volumes and weigh on profitability. Despite these headwinds, strong global air passenger traffic trends signal robust growth potential for stocks in the Zacks Aerospace-Defense Equipment industry. Some key players from this industry that investors may add to their portfolio are Heico Corp. HEI, Curtiss-Wright Corp. CW and AAR Corp. AIR.      

About the Industry

The Zacks Aerospace-Defense Equipment industry comprises firms that manufacture various vital components for the aerospace-defense space, ranging from aerostructures, space shuttles, propulsion systems, aircraft engines, defense electronics, missile and radar systems to flight test equipment, structural adhesives, instrumentation and control systems, communication products and many more. Some of these companies also offer integrated simulation and training services to the U.S. defense force. While most of the revenues are generated from the production of the aforementioned accompaniments, the industry players also generate revenues by providing notable aftermarket support and services like maintenance, repair and overhaul activities to aerospace and defense players.

3 Trends Shaping the Future of the Aerospace-Defense Equipment Industry

New M&As Instill Hope: Rising competition has historically prompted industry majors to expand their product lines through valuable mergers and acquisitions (M&As). Notably, in July 2025, TransDigm Group completed the $110 million-worth acquisition of Servotronics, a global manufacturer of servo controls and other advanced technology components for aerospace and defense applications. In the same month, Teledyne Technologies revealed its acquisition of Maretron assets, including the brand’s Octoplex, MPower and MConnect product lines. This buyout should expand Teledyne’s position as a vessel automation solution provider to boat builders and system integrators. In June, TransDigm agreed to purchase RTX Corp.’s Simmonds Precision Products business, a global designer of fuel & proximity sensing and structural health monitoring solutions for the aerospace and defense end markets, for $765 million in cash.  Such consolidations should improve economies of scale for the industry as a whole, with the players having access to diversified business models. This, in turn, should bolster their revenue growth as well as market reach.

Impressive Air Traffic View Boosts Prospects: World air travel data has been on a steady growth trajectory over the past few months, driven by pent-up passenger demand. Per a report published by the International Air Transport Association (“IATA”) in June 2025, global passenger traffic growth is projected to witness a 5.8% year-over-year rise in 2025. Although this reflects a downward revision from the 8% growth projected earlier by IATA in its December 2024 Outlook report, the positive growth percentage should bode well for aerospace-defense equipment industry stocks, especially those engaged in commercial aviation.

Supply-Chain Disruption Poses Risk: The persistent supply-chain issues continue to affect global trades and businesses. Airlines have been directly affected by unforeseen maintenance issues with certain aircraft/engine types, as well as delays in the delivery of aircraft parts and new aircraft, thereby limiting capacity expansion and fleet renewal.  To this end, IATA announced in its June 2025 outlook that supply-chain vulnerabilities will continue to affect the profitability of the global airline industry in 2025. Notably, IATA’s outlook highlights that aircraft deliveries are currently 30% below their peak, contributing to a record-high backlog of 17,000 aircraft. If this backlog was attributed entirely to delivery delays, it would suggest a shortfall of approximately 5,400 aircraft, equivalent to 18% of the active global fleet. Fewer jet deliveries and shortages of materials for producing aircraft components may force Original Equipment Manufacturers (OEMs) to scale back production, potentially reducing earnings and cash flows for the aerospace and defense equipment industry in the near term.

Zacks Industry Rank Reflects Bright Outlook

The Zacks Aerospace-Defense Equipment industry is housed within the broader Zacks Aerospace sector. It currently carries a Zacks Industry Rank #66, which places it in the top 27% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present a few aerospace-defense equipment stocks that you may want to add to your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.

Industry Beats S&P 500 & Sector

The Aerospace-Defense Equipment industry has outperformed both the Zacks S&P 500 composite and its sector over the past year.  The stocks in this industry have collectively surged 46.2% in a year, while the Aerospace sector has risen 27.1%. The Zacks S&P 500 composite has gained 10.9% in the same time frame.

One-Year Price Performance

 

Industry's Current Valuation

On the basis of trailing 12-month EV/Sales, which is used for valuing capital-intensive stocks like aerospace-defense equipment, the industry is currently trading at 11.14X compared with the S&P 500’s 5.41X and the sector’s 3.27X.

Over the past five years, the industry has traded as high as 11.55X, as low as 8.14X and at the median of 10.02X, as the charts show below.

EV-Sales Ratio TTM

3 Aerospace-Defense Equipment Stocks to Buy

Heico Corp.: Based in Florida, Heico is one of the world’s leading manufacturers of Federal Aviation Administration (“FAA”)-approved jet engine and aircraft component replacement parts. It also manufactures various types of electronic equipment for the aviation, defense, space, medical, telecommunications and electronics industries. On June 11, 2025, the company announced that its board of directors had increased its cash dividend by 9%. 

Looking ahead, the Zacks Consensus Estimate for HEI’s fiscal 2025 sales indicates a 13.3% improvement from the previous year’s registered number. The stock boasts a long-term (three-to-five years) earnings growth rate of 17.6%. HEI currently sports a Zacks Rank #1 (Strong Buy). 

Price & Consensus:  HEI

AAR Corp.: Based in Wood Dale, IL, AIR provides various products and services to the aviation and defense industries worldwide. On June 5, 2025, the company announced that Delta TechOps has selected its aviation maintenance software subsidiary, Trax, to modernize Delta TechOps’ maintenance and engineering systems. This contract should bolster AIR’s revenue growth in future quarters. 

The Zacks Consensus Estimate for AIR’s fiscal 2025 sales indicates a 17.2% improvement from the previous year’s reported number. The estimate for AIR’s fiscal 2025 earnings implies 12.6% growth from the year-ago quarter’s reported figure . It currently carries a Zacks Rank #2 (Buy).

Price & Consensus: AIR

Curtiss-Wright.: North Carolina-based Curtiss-Wright provides highly engineered products and services for high-performance platforms, and critical applications in key areas such as commercial aerospace and defense electronics, reactor coolant pumps for next-generation nuclear reactors as well as advanced surface treatment technologies. On June 11, 2025, CW announced that it has been awarded an approximately $80 million contract by the United States Air Force (“USAF”) to provide its High-Speed Data Acquisition System (HSDAS) hardware and associated repair services. According to the terms of the deal, Curtiss-Wright will provide its full line of Flight Test Instrumentation products and support production platforms, as well as future USAF development programs. This contract win should bolster CW’s backlog and thereby its revenue generation prospects. 

The Zacks Consensus Estimate for CW’s 2025 sales indicates an 8.8% improvement from the previous year’s reported number. The stock boasts a long-term earnings growth rate of 12.5%. CAE currently carries a Zacks Rank #2.  You can see the complete list of today’s Zacks #1 Rank stocks here.  

 

Price & Consensus: CW

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Heico Corporation (HEI): Free Stock Analysis Report
 
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This article originally published on Zacks Investment Research (zacks.com).

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