Investors often look to defense stocks during unpredictable times, and 2025 is no exception. Just months into a new Trump administration, signs point to potentially historic defense spending, as reports suggest a budget near $1 trillion for the Pentagon.
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Heightened tensions with China, continuing unrest in Eastern Europe, and NATO allies ramping up their military outlays have all contributed to a favorable outlook for the industry. Most recently, a geopolitical spat with China could unleash a third active theater of war, following Gaza/Israel and Russia/Ukraine.
In particular, Lockheed Martin (LMT), Northrop Grumman (NOC), and General Dynamics (GD) stand out as smart plays in such a defensively fertile market environment. Each comes from strong momentum and, most importantly, holds a multi-year backlog that can keep revenue flowing regardless of political shifts.
Performance Comparison between LMT, NOC and GD
Performance Comparison between LMT, NOC and GD
Lockheed Martin (NYSE:LMT) | Stealth Fighters and Solid Backlog
Lockheed Martin, the world’s largest defense contractor, reported a record $71 billion in sales last year, up 5%, and ended the year with an all-time high backlog of $176 billion. That backlog, more than twice the annual revenue, is rooted in the F-35 stealth fighter program. After all these years, the F-35 remains the crown jewel of Lockheed’s Aeronautics segment, driving new jet deliveries and decades of maintenance and upgrade contracts.
Today, global demand has spiked as more U.S. allies join the program, offsetting any near-term dips if U.S. budgets fluctuate. Thanks to ongoing geopolitical tensions, Lockheed also benefits from strong missile defense and satellite segments. Even if the Trump administration changes its defense priorities, Lockheed’s long-term contracts offer a robust revenue cushion.
Is LMT Stock a Good Buy?
On Wall Street, analysts are relatively bullish on LMT stock. The stock carries a Moderate Buy consensus rating based on six Buy and 11 Hold ratings over the past three months. LMT’s average price target of $520.35 per share implies a ~16% upside potential over the next twelve months.
Northrop Grumman (NYSE:NOC) | Bombers, Space, and Nuclear Deterrence
Northrop Grumman has also been quietly securing high-tech wins. Like Lockheed, it ended last year with record sales, as revenues rose 4.4% to $41 billion, and the year-end backlog reached $91.5 billion. Much of that success stems from the B-21 Raider program. The remarkable stealth bomber is set to replace the B-2 and forms the bedrock of future U.S. strategic aviation. Northrop also recently secured key contracts in nuclear modernization, notably the new Sentinel ICBM, plus a $900 million award for Poland’s IBCS system.
Add its unique space and missile defense capabilities, and you have a defense colossus with a diversified portfolio anchored by cutting-edge programs the Pentagon deems essential. This translates to a wide margin of safety against any potential budget swings. Northrop’s backlog is loaded with multi-decade projects that are essentially impossible to abandon, especially given their critical role for the U.S. government and the renewed focus on nuclear deterrence.
Is NOC Stock a Buy?
There are 17 analysts offering price targets on NOC stock via TipRanks. The stock carries a Moderate Buy consensus rating based on 11 Buy and six Hold ratings over the past three months. NOC’s average price target of $553.54 per share implies a ~12% upside over the next twelve months.
General Dynamics (NYSE:GD) | Submarines, Tanks, and a Balanced Arsenal
Last but not least, we have General Dynamics, which, in fact, has been one of the fastest-growing players among the aerospace and defense titans, benefiting from several tailwinds. Its $90.6 billion backlog spans everything from Gulfstream business jets to Virginia-class submarines. On the defense side, GD’s Marine Systems division builds the Navy’s advanced submarines, such as the Virginia and Columbia classes, which are cornerstones of U.S. undersea dominance for decades to come.
Meanwhile, the Combat Systems segment churns out Abrams tanks and other land vehicles, which benefit from European allies upgrading their armor amid tensions in Eastern Europe. At the same time, its stable defense business is complemented by a rebounding aerospace unit (Gulfstream), creating both cash flow resilience and growth opportunities.
Is GD Stock a Buy, Sell, or Hold?
General Dynamics is currently covered by 15 analysts, with the consensus leaning bullish. GD features a Moderate Buy consensus rating based on six Buy and nine Hold ratings over the past three months. GD’s average price target of $292.46 per share implies a 13% upside potential over the next twelve months.
Though defense budgets are typically bipartisan, a White House that emphasizes military build-ups surely doesn’t hurt. President Trump’s stated desire for a “trillion-dollar” Pentagon budget implies more funding for nuclear modernization (favoring Northrop and GD), naval expansion (a plus for GD), and tactical aviation (helping Lockheed). Trump has also demanded that NATO members boost defense spending, which has been happening steadily (Poland’s spending alone exceeds 4% of its GDP). This international demand further supports all three firms in aircraft sales and missile defense, space systems, and cybersecurity offerings.
Still, there are wildcards. The administration’s highly-advertized goal of avoiding “endless wars” may shift funds away from certain munitions or overseas deployments. For instance, a swift resolution in Ukraine might dampen near-term demand for items like Lockheed’s HIMARS or Javelins. But even if one program sees a hiccup, each company’s backlog offers multiyear revenues across different platforms. Through that diversification and backlog depth, these titans can reduce vulnerability to abrupt policy changes.
Lock and Load
The defense upswing for Lockheed, Northrop, and General Dynamics isn’t really tied to a presidency, even if it is the hawkishly protectionist Donald Trump. While the Trump administration may accelerate specific deals or budgets, these three defense titans have built a sturdy long-cycle program foundation that protects them from short-term volatility. Fighter jets, submarines, and bombers often require decades of funding, transcending immediate political swings. Add robust global orders, and these three defense titans seem poised to thrive for years. For investors seeking a blend of stability and potential growth in 2025 and beyond, few sectors offer as solid an outlook as U.S. defense.
