RTX clocked in on its third consecutive quarter with a 17% Q1 EPS surprise, while NOC’s top ten directors are buying the stock amid a 12% year-to-date pullback.
A record $194 billion LMT and a new $4.8 billion PAC-3 contract support its bull case despite a Q1 EPS miss tied to the F-16 procurement.
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Defense stocks are a rare corner of the market where national concerns, financial generosity and multi-year income visibility all come together at once. With the Department of Defense’s Fiscal Year 2027 investment request reaching $756.8 billion, and President Trump announcing that “Our Military Budget for 2027 should not be $1 Trillion Dollars, but instead $1.5 Trillion Dollars,” the demand base heading into July is as long as it gets. Goldman Sachs put it the same way, saying that economic security will be a dominant theme in 2026, with NATO’s commitment to defense and industrial restructuring creating huge opportunities for active managers.
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Three words confirm that thesis. Each has an instrument-verified data point that supports the “firmness” label, each has a clear July bull case, and each has a real risk that the price should be.
Lockheed Martin (NYSE: LMT)
Lockheed Martin (NYSE:LMT) trading at $545.70 as of July 2, up nearly 8% over the past month. The stock is up nearly 10% over the next year, but some recent weakness has created a more interesting entry. Forward P/E paid dividends of $171,000 per share last term and an annual yield of 3%.
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The bull case is built on lag and system lock. Lockheed ended 2025 with a record backlog of $194 billion, representing more than 2.5 years of sales, and management reaffirmed FY2026 guidance of $77.5 to $80.0 billion in sales and diluted EPS of $29.35 to $30.25. Critically, the Department of Defense has signed multi-year framework agreements to increase Patriot, THAAD, and PrSM production by three to four times current rates, and Lockheed recently received a $4.8 billion PAC-3 missile production contract. CEO Jim Taiclet said the start of the year “strengthens our confidence in Lockheed Martin’s continued growth and financial performance in the coming year.”
Risks: Q1 2026 EPS of $6.44 missed the estimate of $6.70, dragged down by a negative change in revenue of $125 million for F-16s. The execution of a fixed price contract remains an eternal caveat.
LMT Price Target — 24/7 Wall St.
Northrop Grumman (NYSE: NOC)
Northrop Grumman (NYSE: NOC) it has been the worst performer of the three this year, down 12% year to date to $504.60. That underperformance is an opportunity. Forward P/E sits at 18, dividend yield is 2%, and analyst target of $695.05 suggests reasonable upside from current levels.
The offense is the cleanest of the bunch. Q1 2026 saw EPS of $6.14 beat the average of $6.06, revenue grew 4% to $9.88 billion, and revenue increased 82% year over year. The B-21 Raider went from an operating loss of $183 million to $305 million in operating income, a change that should be compounded as production ramps up. The backlog stands at $95.61 billion with a 1.10 book-to-bill.
The most telling demonstration came from the boardroom. On May 20, 2026, ten Northrop directors bought 349 shares for $552.17 each, a combined purchase that strongly suggests management views the stock’s decline as a gift. CEO Kathy Warden described the quarter as demonstrating “our ability to deliver today’s unprecedented environment around the world.”
Risks: The B-21 LRIP program still has a memory loss provision of $477 million, and the risk of a government shutdown is clearly not in the way.
NOC Price Status — 24/7 Wall St.
RTX Corp (NYSE: RTX)
RTX (NYSE:RTX) it’s the only one of the three to raise full-year guidance after Q1, and its price action shows. The stock is trading at $188.54, up 32% over the past year and 4% over the past month. The forward P/E of 27 is the highest of the three, but the growth profile justifies it. The yield is 1%, and analysts have a target of $215.73.
Bull’s crime is murder. Q1 2026 adjusted EPS of $1.78 beat the $1.52 estimate by 17%, the eighth consecutive quarterly beat. RTX then raised its FY2026 outlook to adjusted sales of $92.5 to $93.5 billion and adjusted EPS of $6.70 to $6.90. The backlog finished Q1 at $ 271 billion, divided by $ 162 billion in trade and $ 109 billion in defense. Recent wins include a $1.1 billion US Navy AIM-9X contract and a $515 million SPY-6 radar contract. CEO Chris Calio cited “organic sales and adjusted operating profit growth across all three segments” as the reason for the increase.
Risks: The Pratt & Whitney powder metal that requires expedited GTF fleet testing is still years in the making, and Collins & Pratt’s tax exposure is a matter of the clock.
RTX Price Status — 24/7 Wall St.
What to Watch in July
Q2 earnings come in late July for all three. Lockheed and Northrop reported in the same calendar week, with RTX close behind. The question is whether the RTX lifts again, whether the momentum of the Northrop B-21 is sustained, and whether Lockheed can put the F-16 behind it. With the combined backlog approaching $560 billion and the defense budget trajectory only pointing upward, the setup favors continued delivery of operations rather than multiple increases.
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Contact person editor@247wallst.com for any questions or corrections.
