At the start of the year, Argus Research identified 10 Investment Themes for 2025. A lot has changed since January 1, with the Trump administration rolling out its trade and cost-cutting agenda. Our themes transcend policies and reflect broad economic and global trends. This week, we take a deep dive into Argus 2025 Theme 8, Aerospace and Defense. Years of under-investment in commercial aircraft and military equipment, coupled with a resurgence in airline travel and recent geopolitical tensions, bodes well for the aerospace and defense industry. On the defense side, we expect solid U.S. government military spending over the next few years as our country looks to counter recent technical advances in the arsenals of adversaries. No doubt, the U.S. budget will also replenish equipment sold to other countries as well. According to the Congressional Budget Office, the proposed 2025 defense budget is $850 billion. International orders will increase the amount spent globally on defense as Donald Trump has pushed foreign allies to fulfil their share of defense spending. These international orders generally come with higher margins for U.S. defense companies, giving them a boost in profitability. On the commercial aircraft side, the recovering global airline industry should help to boost commercial aerospace demand. The global passenger projection for 2024 was about 9.5 billion, or 104% of the 2019 level, representing 10% growth from 2023. We expect this number to continue accelerating in 2025 as lower interest rates put more money in the pockets of consumers and the Trump administration enacts policies to lower the price of petroleum products, including aviation fuel. We look for increased investment in new aircraft as aerospace companies modernize their fleets amid cuts in all but the most-crucial expenditures since the COVID-19 pandemic. Maintenance, repair, and overhaul services (MRO) also should provide tailwinds for companies in the industry, given the recovery in airline flight hours. Record backlogs in aerospace and defense, coupled with the resolution of the machinist strike at Boeing last fall, should also help to drive sales. This week, our list looks at companies in the Aerospace and Defense industry that should benefit from the above trends. All of the below stocks currently are on the Argus BUY list.

Leidos Holdings is a provider of technology and engineering services to defense, intelligence, homeland security, and healthcare customers. The shares are a component of the S&P 500. Based in Virginia, the company has about 47,000 employees.

U.S. stocks closed lower on Thursday, driven by Technology, Utility and Consumer Services stocks. The worst performing stocks were NVIDIA (NVDA), down 8.5% and Super Micro Computer Inc. (SMCI), down 16%. The S&P 500 fell 1.6%, the Dow dropped 0.4% and the Nasdaq lost 2.8%.

Leidos Holdings is a provider of technology and engineering services to defense, intelligence, homeland security, and healthcare customers. The shares are a component of the S&P 500. Based in Virginia, the company has about 47,000 employees.