Defense Stocks Tank Then Soar: Here's Why They're Gunning Higher Today

Core Viewpoint - President Trump signed an executive order affecting defense contractors, prohibiting dividends and share repurchases until they prioritize investments in production facilities and machinery, specifically targeting RTX for its shareholder-focused practices [1]. Group 1: Industry Impact - Major defense firms experienced stock declines of up to 5% following Trump's order, but optimism returned after he proposed a $1.5 trillion defense budget for 2027, significantly higher than the $901 billion allocated for 2026 [2]. - The proposed budget is expected to drive growth in the defense sector, benefiting major contractors like Lockheed Martin, RTX, and General Dynamics [2]. Group 2: Lockheed Martin (LMT) - Lockheed Martin, the largest defense contractor, has a market cap of $115 billion and reported $73.3 billion in sales, returning substantial capital to investors through dividends and buybacks [3]. - In 2024, Lockheed paid $3.1 billion in dividends and repurchased $3.7 billion in shares, with a total of $2.3 billion in dividends and buybacks in the first three quarters of 2025 [3][5]. - Despite steady stock performance, Trump's order may restrict Lockheed's shareholder returns until it demonstrates increased production capacity, although the proposed budget could enhance revenue growth [5]. Group 3: RTX (RTX) - RTX, the second-largest contractor, has a market cap of $249 billion and sales of $86 billion, with 50%-60% of its revenue from government contracts [6]. - The company distributed $3.2 billion in dividends and $444 million in buybacks in 2024, with dividends reaching $2.67 per share in 2025 [7]. - RTX's stock surged 37% in 2024 and another 58% in 2025, but Trump's criticism may halt its shareholder payouts until it invests more in production facilities [8]. Group 4: General Dynamics (GD) - General Dynamics has a market cap of $93 billion and $51.5 billion in sales, generating nearly 80% of its revenue from government contracts [11]. - The company returned approximately $1.5 billion in dividends in 2024 and raised its quarterly dividend to $1.50 per share for 2025, totaling near $1.2 billion [12]. - General Dynamics' stock rose about 1.5% in 2024 and 26% in 2025, but may face pressure to redirect funds from shareholder returns to production investments due to Trump's order [14].