Defense Giants Offer Steadier Space Exposure Than SpaceX IPO

The Pentagon awarded RTX's Raytheon business a five-year multiyear contract with two option years valued at up to $20.7 billion, one of the largest missile production awards in the company's history, as part of efforts to replenish weapons stockpiles amid the conflicts in Ukraine and the Middle East. Raytheon booked $20 billion of defense contracts in the second quarter and carried an $86 billion backlog at the end of that quarter, up from $75 billion at the end of 2025, including $1.8 billion tied to AMRAAM production before the latest award. RTX says AMRAAM production nearly doubled in 2025 versus 2024, and the company is now targeting at least 1,900 missiles annually, roughly a 58% increase from its earlier target of 1,200. In the second quarter, Raytheon's sales rose 18% year over year to $8.27 billion and adjusted operating profit climbed 29% to $1 billion, with adjusted operating margin expanding to 12.6% from 11.6% a year earlier. RTX traded at about 24.6x forward earnings in late September, a roughly 43% premium to the average forward PE of Lockheed Martin at 16.2x, Northrop Grumman at 17x, and General Dynamics at 18.5x, leaving the company little room for error as it scales manufacturing.

Lockheed Martin raised its full-year sales and profit guidance after reporting strong second-quarter fiscal 2026 results and a record backlog of $230 billion. Sales rose 11% from the prior year to $20.1 billion, and net earnings per share came in at $7.94 versus $1.46 a year earlier, when the company was hit by a $1.6 billion charge tied to its Aeronautics unit and helicopter programs that did not repeat. The backlog was up 38.3% year-over-year, an increase of $36.8 billion from six months ago, driven by $65 billion in new orders during the quarter, including a $35 billion multi-year contract for THAAD interceptors. Lockheed now expects full-year sales of $79.75 billion to $81.75 billion, up from an initial range of $77.5 billion to $80 billion and above analysts' average estimate of $79.14 billion, with full-year EPS of $29.95 to $30.65 against earlier forecasts of $29.35 to $30.25 and Wall Street's $29.90. The stock trades at a forward price-to-earnings ratio of 16.16, below the sector median of 18.97, below peer RTX at 24.57, and below its own five-year average of 17.79, with investors watching how the F-35 maker delivers on its third-quarter results expected later this month.

Lockheed Martin's Rotary and Mission Systems business received a $209 million contract modification from the U.S. Navy for production of Surface Electronic Warfare Improvement Program AN/SLQ-32(V)6 systems. The award includes options that could raise the cumulative value of the contract to approximately $1.71 billion, with work performed in Liverpool, NY, and Lansdale, PA, and expected completion by September 2029. The AN/SLQ-32(V)6 is designed to help Navy ships detect, identify and respond to electromagnetic threats, capabilities the service is prioritizing as adversaries field more advanced radar, communications and electronic attack systems. The award underscores continued Navy investment in shipboard electronic warfare and fleet survivability, and Lockheed Martin's role in producing the system positions it to benefit from recurring procurement and upgrades as the Navy modernizes its surface fleet. RTX Corporation and Northrop Grumman also maintain established electronic warfare and sensor capabilities that could benefit from growing naval investment.

BAE Systems has received a contract from Lockheed Martin to deliver high-performance electronic warfare systems for F-35 Lightning II fighter jets. Under the contract, BAE Systems will manufacture and deliver EW systems for F-35 Lots 20-22 and provide systems to retrofit and modernize older aircraft. The AN/ASQ-239 EW system provides the F-35 with electromagnetic spectrum superiority, giving the jets instantaneous bandwidth, high-speed signal processing and advanced algorithms to detect threats and respond quickly. BAE Systems has delivered more than 1,500 EW systems for the F-35 and designs and manufactures them at its facilities in Austin, Texas and the New Hampshire cities of Manchester, Merrimack and Nashua. Amber Dolan, Vice President of F-35 Solutions at BAE Systems, said the company is laser-focused on scaling production and delivering software-based capabilities to meet the rapid pace of conflict.

Boeing announced on the 5th that it has been awarded a seven-year contract worth about $14.7 billion from Lockheed Martin for the expanded production and delivery of seekers, the guidance units, for the PAC-3 Missile Segment Enhancement, or MSE, hit-to-kill interceptor. Under the contract, Boeing will be able to triple its production of PAC-3 MSE seekers. The PAC-3 MSE is a hit-to-kill interceptor used in the Patriot air defense system to intercept ballistic missiles, cruise missiles and aircraft. Lockheed announced in January that it had signed a seven-year framework agreement with the U.S. Department of Defense to raise annual production capacity for PAC-3 interceptors from about 600 to 2,000, and the latest contract is part of that production expansion. Demand for interceptors has surged as conflicts in the Middle East and Ukraine strain U.S. weapons stockpiles, and the U.S. Army in July awarded Lockheed a contract worth up to $58.6 billion to expand PAC-3 missile production. Industry executives, however, warn that Congress has not yet approved the funding needed for these contracts, and contractors may be unable to make large investments in parts and facilities until lawmakers act.

Huntington Ingalls Industries' Newport News Shipbuilding division secured a US$5.10 billion contract in late September 2026 to conduct the refueling and complex overhaul of the USS Harry S. Truman (CVN 75). The award sits alongside the Navy's order for 10 ROMULUS unmanned surface vessels and an expansion of the Pocasset unmanned systems campus, tying long-duration carrier work to growing autonomous maritime capabilities within HII's Mission Technologies division. The company's narrative projects $15.3 billion in revenue and $963.2 million in earnings by 2029, requiring 5.2% yearly revenue growth and a $302.2 million earnings increase from $661.0 million today. That forecast yields a $367.25 fair value, a 37% upside to the current price, while some optimistic analysts assume revenue of about US$16.2 billion and earnings of roughly US$1.2 billion by 2029. The Truman overhaul reinforces HII's backlog but does not remove near-term risk that 2026 free cash flow could miss if contract advances or tax benefits arrive later or smaller than management hopes.