3 Aerospace-Defense Stocks to Buy Amid Impressive US Budget Proposal

Industry Overview - The Zacks Aerospace-Defense industry includes companies that design and manufacture military and commercial aircraft, combat vehicles, missiles, and space transportation vehicles [2] - It also encompasses cybersecurity firms providing IT services and C4ISR solutions, along with defense contractors offering spare parts and maintenance services [3] Key Trends - Improved air traffic outlook is boosting growth prospects, with global air passenger traffic revenue per kilometer increasing by 3.3% year over year to 738.8 billion [4] - The U.S. defense budget is projected to increase by 13% to $1.01 trillion for fiscal year 2026, which will benefit defense-focused companies [5] - Supply-chain disruptions continue to pose challenges, particularly affecting smaller suppliers in the commercial aerospace sector, with a projected drop in aircraft deliveries from 2,293 to 1,802 in 2025 due to these bottlenecks [6][7] Industry Performance - The Aerospace-Defense industry has underperformed compared to the Zacks S&P 500 composite and its own sector, with a collective gain of 7.2% over the past year, while the Aerospace sector grew by 11.9% and the S&P 500 by 8.3% [12] - The industry currently holds a Zacks Industry Rank of 92, placing it in the top 37% of over 250 Zacks industries, indicating positive near-term prospects [9] Valuation Metrics - The industry is trading at a trailing 12-month EV/Sales ratio of 2.82, compared to the S&P 500's 4.86 and the sector's 2.51 [15] Company Highlights - Airbus Group: Revenues improved by 6% year over year, with earnings per share increasing by 33%. The 2025 sales estimate is $82.57 billion, reflecting a 10.4% increase from the previous year [18][19] - Leidos Holdings: Revenues grew by 7% year over year to $4.25 billion, with adjusted earnings up by 30%. The 2025 sales estimate indicates a 2.7% improvement from 2024 [22][23] - Huntington Ingalls Industries: Received orders worth $2.1 billion in the first quarter, with a total backlog of $48 billion as of March 31, 2025. The 2025 sales estimate shows a 3.5% increase from 2024 [26][27]