Industry Overview - The Zacks Aerospace-Defense industry is characterized by companies that design and manufacture heavy-built products, including commercial and military jets, helicopters, combat vehicles, missiles, and military satellites [2][3] - The industry also encompasses cybersecurity firms providing IT services and C4ISR solutions, with revenue streams from defense contractors offering spare parts and maintenance services [3] Key Trends - Increasing Defense Budget: The proposed U.S. defense budget is set to rise to approximately $1.5 trillion in fiscal 2027 from $901 billion in fiscal 2026, which is expected to support long-term contract awards and production rates for defense companies [4] - Air Traffic Growth: Global air passenger traffic increased by 5.7% year over year in November 2025, with a revised full-year forecast of 5.2% for 2025, indicating strong demand in the aviation sector that benefits defense companies [5] - Supply-Chain Challenges: The industry faces significant supply-chain disruptions leading to delivery backlogs of over 17,000 aircraft, which is nearly 60% of the world's active fleet, impacting growth potential despite rising air travel demand [6][7] Market Performance - The Aerospace-Defense industry has outperformed the Zacks S&P 500 composite with a 36.6% increase over the past year, while the Zacks Aerospace sector rose by 40.5% [11] - The industry currently trades at an EV/Sales ratio of 3.39X, lower than the S&P 500's 5.84X and the sector's 3.82X, indicating potential valuation opportunities [14] Notable Companies - **Huntington Ingalls Industries (HII)**: Focuses on nuclear-powered ships and has announced an expansion of its unmanned facility in the U.K. The Zacks Consensus Estimate for HII's 2026 sales indicates a 4.9% improvement year over year [17][18] - **Intuitive Machines (LUNR)**: A diversified space company that recently acquired Lanteris Space Systems for $800 million. The Zacks Consensus Estimate for LUNR's 2026 sales suggests a significant increase of 108.7% year over year [20][21] - **L3Harris Technologies (LHX)**: Engaged in advanced defense technologies and has proposed a partnership with the U.S. Department of War to expand solid rocket motor production. The Zacks Consensus Estimate for LHX's 2026 sales indicates a 6.4% increase year over year [23][24]