Time To Buy Defense Stocks, Analyst Says. One Leads S&P 500
Time To Buy Defense Stocks, Analyst Says. One Leads S&P 500, One Dives On Results
FacebookXLinkedInShare Licensing
HARRISON MILLER08:35 AM ET 03/05/2025
Defense stocks traded unevenly higher early Wednesday following a bullish research note from Citi. Huntington Ingalls led the S&P 500 in premarket trade. AeroVironment (AVAV) unraveled after earnings.
Stock Market Whipsaws Lower; Stride, Life Time, Netflix In Focus
See All Videos
Citi analyst Jason Gursky in a research note reported by The Fly.com wrote that defense stocks have "de-rated significantly" since November 2024, due to uncertainty surrounding impacts from the Department of Government Efficiency and plans from the Trump administration. Defense stocks are now pricing in a range of -1% to 1% growth, which is "too punitive" given the current backdrop for military spending. This likely points to mid-single growth on the horizon, Gursky wrote. He also noted that European defense spending is likely to grow significantly, and added that recent budget resolutions from Congress add upward of $300 billion in spending over the next decade.
European leaders this past week have called to "urgently rearm" their western allies in defense of Ukraine. Meanwhile, President Trump paused military aide to Ukraine following an argument with President Zelenskyy at the White House. President Trump repeated Moscow talking points that Ukraine is at fault for Russia invading the country.
Much of the spending growth will likely focus on modernization efforts to deter peers. "As such, we think it's time to buy defense stocks," Gursky wrote.
Citi has buy ratings on Curtiss-Wright (CW), General Dynamics (GD), Huntington Ingalls (HII), Leidos (LDOS), L3Harris Technologies (LHX), Lockheed Martin (LMT), Northrop Grumman (NOC), RTX (RTX), SAIC (SAIC), Textron (TXT) and V2X (VVX).
Defense Stocks React
Huntington Ingalls shares rallied 11.5% premarket, leading the S&P 500. Shares are poised to rebound above their 50-day line if the move holds.
CW stock, LMT, LHX and TXT ticked up a fraction.
Leidos, Northrop, SAIC, V2X and General Dynamics shares all climbed more than 1%.
RTX rose 1.8%, with shares trading in a cup buy zone following a late January breakout.
London-based BAE Systems (BAESY) rallied 6% early Wednesday. Shares have trended higher as European countries question if they can rely on the U.S. as an ally and defense supplier, given President Trump's moves regarding Ukraine. Airbus (EADSY) shares swung nearly 4% higher. EADSY is trading in a cup-with-handle buy zone.
AeroVironment Earnings
AeroVironment was the exception, as shares tumbled following Q3 2025 results.
The missile and drone maker reported earnings of 30 cents per share adjusted, falling from 63 cents last year. Revenue declined 10% to $167.6 million.
FactSet analysts expected earnings of 48 cents per share on $187.6 million in revenue.
CEO Wahid Nawabi said that the fires in Southern California affected the company's performance during the quarter. Nawabi also noted this has been "a transition year pivoting away from Ukraine demand." Still, AeroVironment expects a "strong" 2025 fiscal year with record Q4 revenue.
Meanwhile, the company's backlog rose to a record $764 million powered by record Switchblade and Jump-20 orders.
For 2025, AeroVironment expects earnings to range from $2.92 to $3.13 per share adjusted. The defense contractor forecasts revenue between $780 million and $795 million. Still, the guidance was below FactSet views for earnings of $3.22 per share on $799 million in revenue.
AVAV stock tumbled 21% early Wednesday. Shares will open at their lowest level since November 2023 if the move holds.
AeroVironment has fallen about 8% in 2025 through Tuesday's close.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
YOU MAY ALSO LIKE:
Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Join IBD Live And Learn Top Chart Reading And Trading Techniques From Pros
Learn How To Time The Market With IBD's ETF Market Strategy
Related news
Defense And Aerospace Stocks To Watch And Industry News
3/03/2025 Track the latest news and stocks to watch in the defense and aerospace industry, including Boeing, Lockheed Martin and Northrop...
Space Industry News And Top Aerospace Stocks
Defense Stocks Rise As Europe Rearms 'Urgently' After Trump-Zelenskyy Clash
Stock Market Extends Losses, But Buyers Lift S&P 500 Off Lows; Cava Falls Late After Earnings
Stocks Showing Improved Relative Strength: Curtiss-Wright
European Defense Stocks Rally As Military Worldview Shifts
Inspirational Quotes: Pat Riley, Samuel Goldwyn And Others
Howmet Aerospace, IBD Stock Of The Day, Unfazed By Trump Defense Budget Comments
Northrop Grumman Mixed, RTX Tops Estimates In Busy Defense Week
Today's Spotlight
Get 70% Off IBD Digital
Navigate market volatility and stay on top of your trades with IBD Digital—try 2 months for $20.
Barron’s Energy Insider Free Trial
Decode the energy market and invest with confidence with our weekly newsletter. Try 4 weeks free.
Free Investing Podcast
Listen to the Investing with IBD podcast for investing tips and new trade ideas every week. Subscribe today!
Partner Center
More News
Nvidia stockNvidia-Backed CoreWeave's IPO Filing Shows Big Revenue Jump, Helped By MicrosoftFiserv, Stock Of The Day, Back In Buy Range Offering Steady GrowthAn Urban Outfitters store in New York CityStay On Right Side Of The Market As Leaders Get Mauled And Tariffs Land
Welcome to Billionaire Club Co LLC, your gateway to a brand-new social media experience! Sign up today and dive into over 10,000 fresh daily articles and videos curated just for your enjoyment. Enjoy the ad free experience, unlimited content interactions, and get that coveted blue check verification—all for just $1 a month!
Account Frozen
Your account is frozen. You can still view content but cannot interact with it.
Please go to your settings to update your account status.
Open Profile Settings