It’s worth taking a moment to consider what’s going on in the aerospace-defense industry right now. Commercial aviation and military spending are two engines that seldom run at full throttle simultaneously, but they are both exerting significant pressure. Observing the order books, it’s difficult to argue against investors’ apparent belief that this is a long-term shift rather than a transient spike. After being silent during the pandemic, factories are now bustling once more. The hangars are packed. Contracts are being signed more quickly than some contractors have the personnel to complete them.
When you stroll close to a major defense plant in a city like Fort Worth or Marietta, you’ll see that the parking lots are full before dawn. The duration of shifts has been increased. Three years ago, suppliers were reducing their workforce; today, they are hiring welders, machinists, and avionics technicians from local trade schools and Craigslist ads. It’s the kind of thing you feel when you’re standing there, but you don’t read about in earnings calls.
It’s difficult to ignore the numbers behind all of this. The largest single policy driver is President Trump’s plan to increase U.S. defense spending to approximately $1.5 trillion by fiscal 2027, a significant increase from the $901 billion figure in fiscal 2026. The trajectory is clear, even though it still needs to pass Congress and final allocations typically end up somewhere different than proposals suggest. Global passenger traffic is expected to more than double by 2050, according to the International Air Transport Association, with revenue passenger kilometers expected to increase from 9 trillion in 2024 to approximately 20.8 trillion. Airlines are unable to deliver aircraft quickly enough due to a record 17,000-jet backlog.
For obvious reasons, Lockheed Martin is at the top of most investors’ lists. Despite its detractors, the F-35 program has grown to be the cornerstone of Western air power, and allies who weren’t particularly big purchasers five years ago now want missile systems like PAC-3 and JASSM. The backlog at Lockheed has surpassed previous records, and the company’s management has been remarkably open about the supply-chain bottlenecks that continue to impede progress. Strangely enough, the stock has held up in part because of that honesty.
Northrop Grumman’s narrative is more subdued. The Pentagon is essentially locked in with the Sentinel ICBM program, despite its problems and excessive budget, and the B-21 Raider bomber is finally transitioning from prototype to production. Longer-term investors believe that Northrop is the destination for patient funds. Although slowly, margins have been increasing. No one is describing it as thrilling. That’s sometimes the point.
Because it combines both trends, Textron is the more intriguing third choice. Its Bell helicopter unit was awarded the Army’s Future Long-Range Assault Aircraft contract, which is anticipated to last for decades. On the commercial side, Cessna and Beechcraft are profiting from an unabated business aviation market. Because Textron isn’t just a defense brand, it could be useful in a portfolio that seeks exposure to both sides of the boom.
All of this carries some risk. Tariffs are making it more difficult to source components, supply-chain problems are real and getting worse in some areas, and smaller suppliers continue to be the weakest link. It’s still unclear if airlines will be able to acquire new aircraft quickly enough to make up for the backlog, or if defense budgets will survive the upcoming election cycle intact. However, the headwinds are currently weaker than the tailwinds. It’s not as common as it might seem.
