Bernstein sees RTX, NOC as winners in FY2026 defense budget proposal

Investing.com - Bernstein analyst Douglas S. Harned has identified potential winners and losers among U.S. defense stocks following the Department of Defense’s June 27 release of its FY2026 budget proposal details. The analysis comes at a time when defense industry leader Lockheed Martin (NYSE:LMT), with its substantial $108 billion market capitalization, continues to demonstrate steady performance with a 3.12% revenue growth over the last twelve months.

The $962 billion DoD defense budget, which reaches approximately $1 trillion when including nuclear and defense-related costs, aligns with President Trump’s promised funding level. However, the proposal faces uncertainty as it relies on Congress adding roughly $113 billion from a yet-to-be-passed reconciliation bill, with significant differences between House and Senate versions.

RTX Corporation emerges as a "clear winner" according to Bernstein, benefiting from budget support for tactical missiles and missile defense programs, including the Golden Dome initiative, with only slight potential offset from reduced Middle East urgency. Northrop Grumman (NYSE:NOC) stands to gain from funding for multiple programs including Sentinel, B-21, TACAMO, and E-2D, with additional support from European initiatives.

L3Harris Technologies (NYSE:LHX) should benefit from next-generation Space Force work and rocket motors, though the analyst notes downward pressure on Army radios represents a negative factor. General Dynamics (NYSE:GD) and Huntington Ingalls Industries (NYSE:HII) both benefit from high shipbuilding funding levels, though challenges remain in improving throughput and margins.

Lockheed Martin (NYSE:LMT) shows positive momentum from Space Force funding, tactical missiles, and missile defense programs, but faces downward pressure from F-35, C-130J and CH-53K programs, with potential softness in Middle East spending. Trading at a P/E ratio of 20.03 and offering a 2.83% dividend yield, InvestingPro analysis suggests the stock is currently undervalued relative to its Fair Value. According to InvestingPro, which offers 8 additional key insights about LMT’s financial health and market position, the company has maintained dividend payments for an impressive 42 consecutive years. Boeing (NYSE:BA) funding for F-47 and MQ-25 programs more than offsets the E-7A cancellation, while Textron (NYSE:TXT) gains from accelerated Future Long-Range Assault Aircraft (FLRAA) funding. For deeper insights into defense sector valuations and comprehensive analysis of over 1,400 stocks, including detailed Pro Research Reports, visit InvestingPro.

In other recent news, Lockheed Martin has secured a significant 10-year contract valued at nearly $3 billion for work on the Aegis Ballistic Missile Defense system. This contract involves design, development, integration, and sustainment activities, with the work being conducted in Moorestown, New Jersey. Additionally, Lockheed Martin has been awarded three U.S. Navy contracts totaling approximately $101.5 million for various naval combat systems, including a $78.4 million modification for undersea warfare combat systems. The company also won a $45.9 million contract modification to convert Long-Range Anti-Ship Missiles, with completion expected by September 2026. Further strengthening its defense portfolio, Lockheed Martin received a $92.2 million modification for AEGIS sustainment and system integration, with work anticipated to be completed by December 2025. In corporate developments, Lockheed Martin declared a third-quarter 2025 dividend of $3.30 per share, payable on September 26, 2025. Meanwhile, Turkish President Tayyip Erdogan expressed hopes for Turkey to rejoin the F-35 fighter jet program after discussions with U.S. President Donald Trump. These developments reflect Lockheed Martin’s continued engagement in defense contracts and shareholder returns.

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