The uptrend in the Aerospace & Defense industry is mapped by the performance of the S&P Aerospace & Defense Select Industry Index, which has added 2.43% year to date, surpassing the S&P 500's 6.06% loss in the same period.
However, some headwinds do remain for the domestic players in the industry.
Tariff and Other Tensions
U.S. defense contractors are bracing for the impact of President Trump's trade war, which has further strained already fragile supply chains. The escalating trade war and the chaotic tariff policy could drive countries to curb their reliance on American-made weapons and invest in developing their own capabilities, a trend that could be reflected in the performance of U.S. Aerospace – Defense Industry players in 2025.
Additionally, Europe is preparing to strengthen its military capabilities and significantly ramp up defense spending to take greater long-term responsibility for its own security, a shift that could add further pressure on the earnings of U.S. defense contractors.
Record-Breaking Surge in Military Spending
Even amid the headwinds, the increase in military spending by global economies gives a significant boost to the U.S. Aerospace – Defense Industry. According to Statista, between 2020 and 2024, the United States commanded about 43% of the global market share, maintaining its position as the world's largest exporter of major weapons.
According to Reuters, global military spending rose to $2.72 trillion in 2024, marking a 9.4% increase over 2023, the sharpest annual rise since the end of the Cold War. U.S. military expenditure grew by 5.7%, reaching $997 billion and accounting for 37% of total global defense spending.
Earnings in Focus
Below, we highlight Q1 earnings results of a few renowned U.S. Aerospace – Defense Industry players.
Northrop Grumman
Northrop Grumman NOC reported first-quarter 2025 earnings of $6.06 per share, which missed the Zacks Consensus Estimate of $6.21 by 2.4%. NOC’s total sales of $9.47 billion missed the Zacks Consensus Estimate of $9.91 billion by 4.4%. The top line also declined 6.6% from $10.13 billion reported in the year-ago quarter.
The company’s operating income during the quarter totaled $573 million, reflecting a significant decline from $1.07 billion in the prior-year quarter.
Per NOC’s CEO, Kathy Warden, as quoted on the company earning’s release, global demand for the company’s products remains robust as highlighted by the record first-quarter backlog. NOC’s total backlog was $92.80 billion at the end of the first quarter compared with $91.47 billion at the end of fourth-quarter 2024.
NOC partially reiterated its 2025 guidance, projecting revenues in the range of $42-$42.50 billion.
RTX Corporation
RTX Corporation RTX reported first-quarter 2025 adjusted EPS of $1.47, beating the Zacks Consensus Estimate of $1.35 by 8.9%. The bottom line also improved 9.7% from the year-ago quarter’s level of $1.34, driven by growth in the adjusted segment’s operating profit.
RTX’s first-quarter sales totaled $20.31 billion, which surpassed the Zacks Consensus Estimate of $19.71 billion by 3%. The top line also surged 5.2% from $19.31 billion recorded for the first quarter of 2024.
RTX posted an adjusted operating profit of $2.66 billion compared with $2.29 billion in the prior-year quarter. For first-quarter 2025, RTX reported a backlog of $217 billion.
RTX reiterated its financial guidance for 2025, with projected adjusted EPS in the band of $6.0-$6.15.
Lockheed Martin
Lockheed Martin LMT reported first-quarter 2025 earnings of $7.28 per share, which beat the Zacks Consensus Estimate of $6.34 by 14.8%. The bottom line increased 15% from the year-ago quarter's reported figure of $6.33 per share, supported by sustained demand for its missile systems and fighter jets.
Net sales came in at $17.96 billion, which beat the Zacks Consensus Estimate of $17.76 billion by 1.1%. The top line also increased 4.5% from $17.20 billion reported in the year-ago quarter, driven by segmental revenue sales growth.
LMT’s backlog as of March 30, 2025, was $172.97 billion compared with $176.04 billion as of Dec. 31, 2024. The company reiterated its 2025 guidance, expecting revenues in the range of $73.75-$74.75 billion.
ETFs to Consider
Even amid challenges, the aerospace and defense industry maintains an optimistic outlook. Given the current geopolitical climate, the trend of rising military spending is likely to persist.
For investors looking to take a bet on Q1 results as well as a continued surge in military spending, the following Aerospace – Defense ETFs provide a great opportunity.
Investors can consider iShares U.S. Aerospace & Defense ETF ITA, Invesco Aerospace & Defense ETF PPA, SPDR S&P Aerospace & Defense ETF XAR, Global X Defense Tech ETF SHLD and U.S. GlobalTechnology and Aerospace & Defense ETF WAR.
Regarding charging annual fees, XAR is the cheapest option, charging 0.35%, and is more suitable for long-term investing.
With a one-month average trading volume of about 792,000 shares, SHLD is the most liquid option, offering investors easier entry and exit, ideal for active trading strategies.
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