Defense stocks haven’t been defensive stocks per se, but they generally stayed in a familiar lane for investors. But in 2025, many defense stocks are looking bubbl-icious. That means that they have valuations that are closer to those of technology stocks, which many analysts believe are entering, if not already in, the bubble stage.
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That’s a topic for another article on another day. In this article, I’m just taking you where the data is leading. It starts with the iShares U.S. Aerospace & Defense ETF (BATS: ITA), an industry proxy. It’s up more than 44% year-to-date.
That’s a nice gain. However, there are some individual stocks within the ETF that are doing 10% or 20% better, and some that are even doing better than that. But as every fund investor knows, when it comes to an ETF, you have to take the trash with the treasure.
That sounds harsh, but some of the stocks inside this ETF are lagging the market. That includes some “big names” that have a negative return this year.
The question is, are these valuations justified? They may be. Critics will argue that as the defense industry transitions into new technologies, it’s becoming more opaque. On the other hand, these new technologies are redefining the nature of battle and mean a rethinking of the nation’s military industrial complex.
If you’re comfortable investing in the ITA ETF, here are two defense stocks that may make you reconsider that decision. I’ll also look at one “big name” defense stock that is a laggard, but perhaps not for long.
RTX: The Mega Cap Beast That Continues to Gain Strength
RTX (NYSE: RTX) may be more familiar to investors by its former name Raytheon. That was before it became the parent company of Pratt & Whitney and Collins Aerospace. The company is a dominant force in the defense sector, particularly with many of the cutting-edge technologies that the modern military needs.
RTX has a backlog of $251 billion. That’s close to three years of revenue and provides strong visibility of the company’s future revenue and earnings. Much of this backlog comes from aircraft engines and defense systems that will remain essential to U.S. and allied militaries for years to come.
RTX is also well-positioned to benefit from the Trump administration’s Golden Dome initiative, a proposed multi-layer missile defense system that would rely heavily on Raytheon’s radar, interceptors, and command systems. This project could mirror the strategic scale of Cold War–era programs, offering RTX a long runway of defense-driven growth.
The stock is up about 54% year-to-date, outpacing the broader defense sector and contributing significantly to the ITA ETF’s strong performance. In what will be a familiar theme for these defense stocks, RTX stock has a current price-to-earnings (P/E) ratio of 36x, well above its historic average. But its forward P/E ratio is around 28x, which puts it firmly in line with its own history.
Investors also benefit from a solid dividend, with a 1.52% yield, and backed by consistent free cash flow, which is expected to come in at over $7 billion in 2025.
GE Aerospace: The New Powerhouse of Modern Defense
GE Aerospace (NYSE: GE) officially separated from General Electric in April 2024, and the streamlined, defense-focused business has quickly become one of the darlings of Wall Street. GE stock is up more than 86% year-to-date, powered by record demand for jet engines, defense propulsion systems, and advanced avionics.
A key advantage for GE Aerospace is its strong position in both commercial and military aviation. As the global fleet expands and nations modernize their air forces, GE’s LEAP and GE9X engines remain indispensable.
Defense programs like the F-35 and B-52 re-engine initiative further enhance its growth outlook. The company is also moving aggressively into AI-driven predictive maintenance and digital twin technologies, which improve reliability and reduce downtime for defense clients.
Financially, GE Aerospace boasts expanding margins, a growing backlog exceeding $135 billion, and rising free cash flow. With its new focus, the company trades at a premium valuation, but investors see it as a best-in-class operator that combines industrial discipline with defense-sector momentum.
Lockheed Martin: The Comeback Kid of Defense Stocks
Lockheed Martin (NYSE: LMT) is synonymous with the defense industry for good reason. The company is the country’s largest defense contractor, with a backlog of over $179 billion. That’s over two years of the company’s revenue.
However, LMT stock is down 5.5% year-to-date and is down 19.5% in the last 12 months. The reason is that many defense contractors, even the largest names like Lockheed Martin, are subject to the whims of the federal government.
But wait, you say. Didn’t the government increase the defense department’s budget to record levels? It did as part of the Trump administration’s One Big Beautiful Bill.
However, at the beginning of the year, some defense contracts were put on hold, subject to review by the Department of Government Efficiency (DOGE). The government shutdown also paused some of these projects.
But the government is reopening and, as of this writing, that will include funding for the defense budget through 2026 regardless of what shenanigans happen in the interim. That’s a bullish sign for a company that recently added $2 billion to its share buyback capacity.
LMT stock trades at a current P/E ratio of around 25x earnings, which is a premium to its historical average. However, the stock’s forward P/E ratio of 16x puts the stock at a discount. Shareholders also get a safe dividend that yields over 3% and has increased for 22 consecutive years.
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