RTX, NOC, and LMT: 3 High Caliber Defense Stocks in a Dangerous Market
While we all hope for a peaceful resolution to the escalating tensions between Israel and Iran—far more important than market movements—the conflict serves as a stark reminder of the strategic value of defense stocks.
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I've written about the defense sector previously, and these picks have performed admirably since then. Let's take a look at three of the top aerospace and defense stocks, Lockheed Martin (LMT), RTX (RTX), and Northrop Grumman (NOC), to see where they stand today.
Aerospace and defense companies often offer stable, long-term investment appeal. Their revenues are typically underpinned by multi-year contracts with governments and militaries, providing predictable cash flow.
The industry also features high barriers to entry, given the critical nature of the work and the long-standing relationships required to secure contracts—governments are unlikely to entrust vital defense programs to unproven newcomers. Many of these companies are also mature, dividend-paying businesses, making them attractive holdings in uncertain geopolitical environments.
RTX Corporation (NYSE:RTX)
Formerly known as Raytheon, RTX is one of the largest and most recognizable players in the aerospace and defense sector, with a market capitalization approaching $200 billion. The company was formed through a 2020 merger between Raytheon and United Technologies' aerospace and defense businesses. Today, RTX operates through three major segments.
Firstly, Collins Aerospace, a leading provider of advanced aerospace and defense systems, generated $28.3 billion in revenue in 2024. Second, Pratt & Whitney, a leader in aircraft engines and power systems, generated $28.1 billion in revenue in 2024. Lastly, Raytheon, focused on defense technologies including cybersecurity, contributed $26.7 billion last year.
With nearly equal revenue distribution across its divisions, RTX is a well-balanced industrial powerhouse. While the U.S. government is its largest customer, RTX also serves global allies, including Poland and the UAE, among others, thereby reinforcing its geopolitical relevance.
The stock has gained almost 40% in the past year and now trades at 25x 2025 earnings estimates, slightly above the S&P 500's forward P/E of 21.5, but not excessively priced given the company's scale and stability.
RTX also appeals to income investors. It offers a 1.8% dividend yield, modestly higher than the S&P 500's 1.3%, but where it truly stands out is in dividend growth. With 32 consecutive years of dividend increases, RTX has earned its place among Dividend Aristocrats, showcasing a long-standing commitment to returning value to shareholders.
Is RTX a Good Stock to Buy?
Turning to Wall Street, RTX earns a consensus Moderate Buy rating based on 11 Buys, five Holds, and zero Sell ratings assigned in the past three months. The average analyst RTX stock price target of $138.93 implies 4.7% downside potential from current levels.
Northrop Grumman (NYSE:NOC)
Formed in 1994 through the acquisition of Grumman Aerospace by Northrop Corporation, Northrop Grumman (NOC) has grown into a $72 billion cornerstone of the aerospace and defense industry. The company produces a wide range of cutting-edge technologies, including advanced weapons, missile defense systems, and aircraft such as the B-21 Raider stealth bomber. It also maintains strong positions in space systems and mission solutions.
In 2024, Northrop Grumman reported solid revenue across its diversified business units: Aeronautics ($12 billion), Space Systems ($11.7 billion), Mission Systems ($11.4 billion), and Defense Systems ($8.6 billion).
This diverse revenue base highlights the company's broad capabilities and stable income streams. Like RTX, Northrop Grumman maintains a strong international footprint, serving clients in 25 countries, reinforcing its global relevance.
The stock currently trades at 20x 2025 earnings estimates, making it cheaper than RTX and slightly below the S&P 500 average, positioning it as a solid, if not flashy, value play for investors.
In terms of income, Northrop Grumman matches RTX with a 1.8% dividend yield. More importantly, it's a reliable dividend growth stock, having paid dividends for 35 consecutive years and increased its payout for 21 straight years, underscoring its consistency and shareholder focus.
Is Northrop Grumman Stock a Good Buy?
Turning to Wall Street, NOC earns a consensus Moderate Buy rating based on 10 Buys, five Holds, and zero Sell ratings assigned in the past three months. The average analyst NOC stock price target of $541.36 implies 9.4% upside potential from current levels.
Lockheed Martin (NYSE:LMT)
With a market cap of $112 billion, Lockheed Martin (LMT) stands as one of the most established and recognizable names in the aerospace and defense sector. The company is renowned for its iconic military aircraft, including the F-16 Falcon and the F-35 Lightning II, with its Aeronautics segment generating $28.6 billion in revenue in 2024.
Lockheed Martin's operations are broad and well-diversified, including Missiles and Fire Control, which generated $12.6 billion in sales for 2024; Rotary and Mission Systems, featuring Sikorsky helicopters and maritime technologies, contributing $17.2 billion; and its Space segment, which brought in $12.4 billion for the year.
Altogether, Lockheed Martin reported $71 billion in total revenue for 2024, showcasing the scale and balance of its business. Internationally, Lockheed maintains a robust global presence, working with over 50 countries, including Australia, Germany, Poland, Saudi Arabia, Singapore, and South Korea, which provides meaningful geographic diversification.
From a valuation standpoint, Lockheed Martin appears attractive, trading at just 17x 2025 earnings estimates —cheaper than the broader market and the least expensive stock among its peers in this comparison.
Income investors will also find Lockheed compelling. With a 2.75% dividend yield, it offers more than double the S&P 500's average and is the highest-yielding stock among prominent U.S. defense names. The company has paid dividends for 29 consecutive years and raised its payout for 22 straight years. With a payout ratio of less than 50%, Lockheed has ample room to continue growing its dividend in the years ahead.
Is Lockheed Martin Stock a Buy or Sell?
LMT earns a consensus Moderate Buy rating based on seven Buys, eight Holds, and zero Sell ratings assigned in the past three months. The average analyst LMT stock price target of $521.07 implies 11.2% upside potential from current levels.
Why Lockheed Martin Stands Out Among Top Defense Stocks
I'm bullish on all three of these aerospace and defense stocks, each of which offers a durable business model, long-standing government relationships, diversified revenue streams across multiple segments, reasonable valuations, above-average dividend yields, and impressive records of dividend growth.
Among them, I find Lockheed Martin the most compelling, thanks to its lowest valuation and highest dividend yield of the group, alongside a strong track record of consistent dividend increases.
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