Still Time to Buy the Top Aerospace & Defense Stocks?

The pile into aerospace and defense stocks has lost steam, but thankfully, some of the major global conflicts have begun to ease, particularly between Israel and Iran.

Nevertheless, aerospace and defense stocks have proven to be viable investments as global defense spending has continued to surge in response to such escalating geopolitical tensions. Last year, defense spending surged over 8% to a record $2.3 trillion, with the upward momentum carrying into 2025.

With defense budgets expanding worldwide, particularly in Europe, Asia, and the Middle East, many savvy investors are closely monitoring the top aerospace and defense stocks.  

GE & Howmet Aerospace’s Leadership

At the helm of engineered solutions for both defense and commercial aircraft have been GE Aerospace GE and Howmet Aerospace HWM. Outside of the defense spending surge, GE and Howmet are benefiting from a push into more fuel-efficient commercial aircraft, as airlines upgrade their fleets to meet emission goals.

Seeing increased demand for advanced airline components, GE’s revenue jumped 23% year over year in Q2 to $10.15 billion, driven by high demand for its LEAP GEnx and GE9X engines. Meanwhile, high demand for engine spares such as turbine blades led to Howmet posting record Q2 revenue of $2.05 billion, with the company hitting a quarterly peak for profits and cash flow as well.

Despite their phenomenal gains in recent years, buyer exhaustion has yet to set in, with GE and Howmet expected to post high double-digit EPS growth for the foreseeable future. At the moment, GE stock lands a Zacks Rank #3 (Hold) with HWM shares sporting a Zacks Rank #2 (Buy) in correlation with a trend of positive earnings estimate revisions over the last 60 days.

Top Niche Equipment Providers

Disrupters or companies with a niche tend to attract investors, and Astronics ATRO and TAT Technologies TATT have done so as specialized aerospace defense equipment providers.

Astronics' stock had spent quite some time on the coveted Zacks Rank #1 (Strong Buy) list as a manufacturer of specialized lighting and electronics for military, commercial transport, and private business jet aircraft. That said, ATRO has now soared nearly +200% this year but currently sports a Zacks Rank #2 (Buy) as EPS revisions have remained higher in the last two months, suggesting more upside despite such an extravagant rally.

As for TAT Technologies, the trend of positive EPS revisions has kept it on the strong buy list after being added two weeks ago, with the company providing heating and cooling systems, along with emergency power systems and jet fuel starters for F-16s. Like Astronics, TAT Technologies' stock is hovering near a 52-week high of over $40 a share, with TATT up more than +70% YTD.

Along with their increased profitability, the excitement for these aerospace sector stocks has been attributed to their reasonable valuations luring investors. To that point, both still trade at 27X forward earnings, offering a nice discount to their Zacks Aerospace-Defense Equipment Industry average of 34X, and being closer to the benchmark S&P 500’s average.

Bottom Line

The performance of these top aerospace and defense stocks has been absolutely mesmerizing, making them worth keeping an eye on as global defense spending has remained near record levels. While there may be reluctance to chase the rally, they certainly may serve as some of the best buy-the-dip candidates to consider.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research