The second-quarter 2025 reporting cycle for defense stocks has begun, with major S&P 500 defense contractors like Lockheed Martin and General Dynamics surpassing earnings expectations. Geopolitical tensions worldwide are driving demand for defense products, leading to order growth and revenue expansion for defense stocks.

Increased defense spending globally, including a proposed 13% increase in the US defense budget to $1.01 trillion for fiscal 2026, is boosting order volumes for US defense contractors. Ongoing conflicts like the Russia-Ukraine war have also contributed to increased revenue for the defense sector.

General Dynamics, with exposure to commercial aerospace, saw 4.1% year-over-year growth in its Aerospace segment. However, challenges like labor shortages and supply-chain disruptions, along with import tariffs, may impact defense firms’ second-quarter performance to some extent.

The Aerospace sector is expected to see a 11.5% year-over-year earnings surge in the second quarter, with 24.8% sales growth. The Zacks methodology focuses on stocks with a positive Earnings ESP and a Zacks Rank #1, #2, or #3 for potential earnings beats.

Archer Aviation and Heico Corp. are expected to outperform this reporting cycle, with both companies set to release their quarterly financial results soon. Archer Aviation is working on developing defense applications alongside its urban air taxi project, while Heico provides critical support to government programs.

Archer Aviation, with an Earnings ESP of +2.70% and Heico with an Earnings ESP of +1.16%, are poised for strong second-quarter results. Archer Aviation is expected to report a loss of 19 cents per share, while Heico is expected to post earnings of $1.12 per share.

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Read more at Nasdaq, Inc.: 2 Defense Stocks Poised to Surpass Q2 Earnings Estimates