Top Defense Stocks for Q4 2021

BAESY, HII, and AXON are top for value, growth, and momentum, respectively

The defense industry produces modern weaponry, including combat vehicles, ships, bombers, and fighter jets. Companies in the industry also offer cybersecurity, information technology (IT), analytics, robotics, and intelligence systems. Its primary customer is the U.S. government, but it also sells its products and services to foreign governments and law enforcement agencies. Large defense companies include Lockheed Martin Corp. (LMT), Raytheon Technologies Corp. (RTX), and Northrop Grumman Corp. (NOC).

The Invesco Aerospace & Defense ETF (PPA) holds a broad range of stocks, including some from companies that are not pure-play defense companies, such as those involved in civilian aerospace manufacturing. However, it is the closest proxy available for the defense industry. PPA has underperformed the broader market with a total return of 28.5% over the last 12 months compared to the benchmark iShares Russell 1000 ETF's (IWB) total return of 35.7%. These performance figures and all statistics in the tables below are as of Sept. 9, 2021.

Here are the top 3 defense stocks with the best value, the fastest growth, and the most momentum.

Best Value Defense Stocks

These are the defense stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Defense Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
BAE Systems PLC (BAESY) 30.77 24.8 10.3
Huntington Ingalls Industries Inc. (HII) 199.49 8.0 10.8
Northrop Grumman Corp. (NOC) 360.40 57.7 13.0

Source: YCharts

  • BAE Systems PLC: BAE Systems is a British defense contractor. The company manufacturers naval ships and submarines for governments around the world. It produces military aircraft and guided weapons systems as well.
  • Huntington Ingalls Industries Inc.: Huntington Ingalls is a shipbuilding company that designs, builds, and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. It also provides ship repair and maintenance services. In mid-August, the company completed the acquisition of Alion Science and Technology, which offers services such as ISR Technology (Intelligence, Surveillance, and Reconnaissance), network and software engineering, integration, and weapons platforms. Alion is expected to bolster Huntington's military training and simulation, cyber and data analytics efforts. Alion was previously owned by Veritas Capital. The terms of the acquisition were not disclosed in the press release.
  • Northrop Grumman Corp.: Northrop Grumman is a global security company that provides services and security systems to clients in the aerospace, information systems, and electronics industries, among others. Its products include manned and unmanned aircraft, and electronic warfare systems. In August, the company declared a quarterly dividend of $1.57 per share of common stock to be payable Sept. 15 to shareholders of record as of Aug. 30, 2021.

Fastest Growing Defense Stocks

These are the top defense stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Fastest Growing Defense Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Huntington Ingalls Industries Inc. (HII) 199.49 8.0 146.2 10.1
Curtiss-Wright Corp. (CW) 115.93 4.7 101.4 13.0
Heico Corp. (HEI) 124.97 16.9 40.0 22.1

Source: YCharts

  • Huntington Ingalls Industries Inc.: See company description above.
  • Curtiss-Wright Corp.: Curtiss-Wright designs and builds a variety of precision systems and components. The company's products are used by the aerospace, automotive, petrochemical, power generation, and agriculture industries. In addition to strong net earnings and revenue growth, Curtiss-Wright reported 11% YOY growth to new orders for Q2 2021. The performance was driven by strong demand in the company's Commercial markets business.
  • Heico Corp.: Heico is an aerospace and electronics company that designs and builds products for defense equipment, spacecraft, aircraft, medical equipment, and telecommunications systems. Heico's net income rose 41.6% YOY in Q3 FY 2021, ended July 31, 2021. Operating income increased by 47.4% over the same period. The company's performance was driven by quarterly consolidated organic net sales growth and by the favorable impact of acquisitions.

Defense Stocks with the Most Momentum

These are the defense stocks that had the highest total return over the last 12 months.

Defense Stocks with the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Axon Enterprise Inc. (AXON) 182.56 12.0 124.4
AeroVironment Inc. (AVAV) 105.50 2.6 52.9
Huntington Ingalls Industries Inc. (HII) 199.49 8.0 44.1
Russell 1000 N/A N/A 35.7
Invesco Aerospace & Defense ETF (PPA) N/A N/A 28.5

Source: YCharts

  • Axon Enterprise Inc.: Axon Enterprises develops and manufactures security systems primarily for use in law enforcement. It offers tasers, sensors, on-officer body and in-car cameras, and software that is integrated with the devices. On Aug. 25, Axon announced that it had completed the acquisition of My90 Inc., which collects anonymized community feedback to help police agencies improve trust, safety, and equity. The terms of the acquisition were not disclosed.
  • AeroVironment Inc.: AeroVironment designs and manufactures small unmanned aircraft as well as fast-charge systems for electric industrial vehicle batteries. The company also sells antennae, sensors, and missile systems to customers in the U.S.
  • Huntington Ingalls Industries Inc.: See company description above.

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  1. YCharts. "Financial Data." Accessed Sept. 9, 2021.

  2. Huntington Ingalls Industries Inc. "Huntington Ingalls Industries Completes Acquisition of Alion Science and Technology." Accessed Sept. 9, 2021.

  3. Northrop Grumman Corp. "Northrop Grumman Board Declares Quarterly Dividend." Accessed Sept. 9, 2021.

  4. Curtiss-Wright Corp. "Curtiss-Wright Reports Second Quarter 2021 Financial Results; Raises Full-year 2021 Financial Guidance." Accessed Sept. 9, 2021.

  5. Heico Corp. "HEICO Corporation Reports a 33% Increase in Quarterly Operating Cash Flow and 17% Quarterly Organic Net Sales Growth as the Commercial Aerospace Industry Continues to Recover." Accessed Sept. 9, 2021.

  6. Axon Enterprise Inc. "Axon Furthers Commitment to Community Engagement with Acquisition of My90." Accessed Sept. 9, 2021.