3 Stocks Positioned to Gain From Renewed U.S. Defense Priorities

Defense stocks have moved higher in recent weeks, outperforming much of the broader market as investors respond to a combination of geopolitical uncertainty and shifting policy expectations in Washington. Rising global security concerns have reinforced the view that defense spending will remain a priority for major governments, supporting sustained demand for military equipment, technology upgrades and long-term defense programs.

A key factor behind the renewed momentum has been President Donald Trump’s influence on the policy narrative. Trump has repeatedly emphasized the need for a significantly stronger U.S. military, calling for substantial increases in defense spending and accelerated modernization of armed forces. His rhetoric has revived expectations of higher budget allocations for missile defense, aerospace systems and next-generation military technologies, lifting sentiment across the sector. Three stocks that have come into focus because of this are Kratos Defense & Security Solutions, Inc. KTOS, Huntington Ingalls Industries, Inc. HII and Teledyne Technologies Incorporated TDY.

At the same time, Trump’s tougher stance toward defense contractors has added nuance to the rally. While his push for greater accountability and criticism of cost overruns has created pockets of volatility, investors largely view his approach as reinforcing the strategic importance of defense capabilities rather than undermining long-term spending commitments. The result has been rising interest in companies with strong order backlogs and exposure to priority defense programs.

Defense stocks have also benefited from their reputation as relatively defensive investments. Long-term government contracts provide revenue visibility, making the sector attractive amid concerns over economic growth, interest rates and broader market volatility.

Looking ahead, market participants will closely monitor U.S. budget negotiations, congressional responses to proposed defense increases and the pace of new contract awards. Developments in global security and Trump’s ongoing influence on defense policy are likely to remain central drivers, shaping whether the recent gains can extend further in the months ahead.

Our Choices

The stocks below flaunt a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kratos Defense & Security Solutions is a San Diego–based technology firm providing defense, security and unmanned systems solutions to U.S. and international government and commercial customers. KTOS’ expected earnings growth rate for the current year is 4.1%. The Zacks Consensus Estimate for its next-year earnings has improved 2.8% over the past 60 days. KTOS has a Zacks Rank #2.

Huntington Ingalls Industries designs, builds and services nuclear and non-nuclear military ships, while providing mission technologies such as C5ISR, cyber, AI and autonomous systems for U.S. defense. HII’s expected earnings growth rate for the current year is 8%. The Zacks Consensus Estimate for its next-year earnings has improved 1.1% over the past 60 days. HII has a Zacks Rank #2.

Teledyne Technologies delivers advanced imaging, instrumentation, aerospace and defense electronics, supporting industrial, defense, space and energy markets worldwide. TDY’s expected earnings growth rate for the current year is 8.5%. The Zacks Consensus Estimate for its current-year earnings has improved 0.2% over the past 60 days. TDY has a Zacks Rank #2.

Bottom Line

Defense stocks have recently surged as global military spending climbed amid geopolitical tensions, including in Greenland and Venezuela, lifting European and U.S. defense equities to new highs. Investors view defense as a resilient growth theme despite valuation risks.

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

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