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.  
 

The company delivered $22.48 billion in revenue, which was 5.4% higher than estimates for $21.22 billion. That was 11.8% higher than the company’s revenue in the same quarter in 2024.  

Earnings per share (EPS) gains were even stronger. RTX delivered EPS of $1.70, beating expectations for $1.41 by over 20%. That was roughly the same percentage beat on a year-over-year (YoY) basis. 

The company also raised its full-year guidance at the low and high range for adjusted sales, organic sales growth and adjusted EPS. It left its guidance for free cash flow (FCF) unchanged. That’s not much of a concern. The company has more than enough cash to deploy towards debt reduction and dividend payments. Plus, the company is guiding to $10 billion in FCF by 2027.  

A Sum of Its Parts Play for Investors 

Although RTX has managed to mitigate some of the expected tariff impacts, the uncertain nature of the tariffs will continue to be something for investors to watch. However, this report showed the company has other catalysts at play regarding its defense business.  

The most significant catalyst is an ammunition shortfall, which is RTX’s key revenue stream. Orders for its Coyote counter drone system, air-to-air missiles, and Patriot missiles were both up for the quarter. The company also reported a sizable backlog, including a 1.0x book-to-bill ratio that is likely to keep revenue flowing for some time.  

But RTX also generates about half of its revenue from its commercial aerospace business. The company’s Collins Aerospace division reported 11% organic sales growth and secured a 10-year contract with Japan Airlines to provide “comprehensive MRO services for their fleet of more than 50 787 widebody aircraft and future deliveries through 2035.” 

Similar growth was also evident in the company’s Pratt & Whitney division, which saw 16% organic growth. This division has both commercial and defense businesses, including the F135 engine. The company was awarded a $2.8 billion contract for the production of Lot 18 of the F135 engine.  

Is RTX a Buy or a Hold?

I left out “Sell” as an option because RTX clearly has room to grow. The question for investors is how much growth they want, and at what price. RTX stock trades at around 38x earnings, that’s about a 6.5% premium to its historical average.  

However, analysts forecast 11.9% earnings growth in the next 12 months and put the stock’s forward price-to-earnings (P/E) ratio at 28x. That’s still a slight premium to the stock’s five-year average of around 27x.  

All that says is that RTX is expensive to own near its all-time high. From a technical standpoint, the stock is showing signs of being overbought.  

The stock is trading about 6% above analysts’ consensus price target of $164.13. However, two analysts, Bernstein and Deutsche Bank, raised their price targets in the 30 days before earnings.  

That said the high price of $190 leaves about 12% upside on top of the stock’s growth of around 37% in the last 12 months. That’s consistent with the 3- and 5-year total return in RTX stock.  

That argues for a Hold. If you’re not in the stock, you’ll want to see if other analysts follow suit after earnings. Price targets that move RTX stock towards $200 will make the Buy case more attractive. Otherwise, you’ll want to wait for a pullback to pre-earnings levels.