As global defense spending accelerates in 2025, investors are closely scrutinizing top U.S. defense contractors: Lockheed Martin (LMT), RTX Corporation (RTX, formerly Raytheon), and Northrop Grumman (NOC).
Each company boasts robust backlogs, strong government ties, and unique growth drivers. But which is best positioned to deliver superior returns in the current environment?
Lockheed Martin (LMT):
Lockheed Martin remains the industry’s anchor, reporting $18 billion in Q1 2025 sales (up 4% year-over-year) and net earnings of $1.7 billion. Its $173 billion order backlog ensures multi-year revenue visibility, with recent contract wins in missile defense, aeronautics, and integrated warfare systems.
The company’s profitability is robust, with a 2.76% dividend yield and consistent shareholder returns through buybacks and dividends. LMT’s forward price-to-earnings (P/E) ratio of 16.2x is attractive compared to industry averages, and analysts set a consensus target price near $621 per share—suggesting notable upside from current levels.
Lockheed’s global reach, innovation in hypersonic and AI-driven defense, and pivotal role in recent multi-billion-dollar Gulf region agreements further cement its leadership.
RTX Corporation (RTX):
RTX, the world’s largest aerospace and defense company, reported Q1 2025 sales of $20.3 billion (up 5% year-over-year) and maintains a record $217 billion backlog. The company’s strength lies in its diversified portfolio—spanning Collins Aerospace, Pratt & Whitney, and Raytheon—serving both commercial and defense markets.
RTX’s adjusted EPS grew 10% in Q1, and the company projects $83–$84 billion in 2025 sales with 4–6% organic growth. Institutional investors have ramped up holdings, signaling confidence in RTX’s trajectory. However, RTX trades at a forward P/E of 22.1x, pricier than LMT and NOC, and its return on invested capital (ROIC) lags peers, raising valuation concerns.
While RTX benefits from defense modernization and commercial aerospace recovery, its premium valuation and recent flat EPS growth temper its near-term return potential.
Northrop Grumman (NOC)
Northrop Grumman is a powerhouse in autonomous systems, missile defense, and space technology. The company’s Q1 2025 results highlighted continued growth, with a trailing 12-month revenue of $39.1 billion and an $80+ billion backlog.
NOC’s strategic investments—such as a $50 million stake in Firefly Aerospace—position it for leadership in the fast-growing commercial and national security space sectors. Its B-21 Raider stealth bomber program and missile defense contracts offer long-term stability.
With a forward P/E around 17.4x and a sustainable $8.49 per share dividend, NOC combines innovation with steady shareholder returns. Analyst projections call for 8–10% compound annual revenue growth over the next three to five years, driven by space and defense tailwinds.
| Metric | Lockheed Martin (LMT) | RTX Corporation (RTX) | Northrop Grumman (NOC) |
|---|---|---|---|
| Q1 2025 Sales | $18.0B | $20.3B | $10.0B (Q3 2024) |
| Backlog | $173B | $217B | $80B+ |
| Dividend Yield | ~2.76% | ~2.4% | ~1.8% |
| Forward P/E | 16.2x | 22.1x | 17.4x |
| 2025 Growth Drivers | Hypersonics, Gulf deals, AI | Commercial aerospace, defense modernization | Space, B-21, missile defense |
| Analyst Sentiment | Buy/Strong Buy | Hold/Buy | Strong Buy |
Which Stock Offers the Best Return Potential?
All three companies are well-positioned for the defense sector’s secular growth, but Lockheed Martin (LMT) stands out for its combination of robust backlog, attractive valuation, steady dividend, and global leadership in next-generation defense technologies. LMT’s discounted P/E, strong contract momentum, and expanding international presence make it the most compelling choice for investors seeking both growth and stability.
Northrop Grumman (NOC) is a close contender, especially for those prioritizing exposure to space and autonomous systems, while RTX offers diversification but at a higher valuation and with some recent growth concerns.
Bottom line: For the best blend of return potential, stability, and value in 2025, Lockheed Martin is the top pick among U.S. defense giants.
