Pentagon Missile Push Fuels Defense Stock Surge

Three years of supplying Ukraine with billions in military aid to counter Russia, combined with arming Israel against Hamas rocket attacks, has critically depleted U.S. military stockpiles. As China emerges as a growing geopolitical threat, the Pentagon is sounding alarms and taking unprecedented action. The Department of Defense has ordered suppliers to double or “even quadruple” missile production on what The Wall Street Journal describes as a “breakneck” schedule to rebuild inventories and prepare for potential conflicts.

The urgency was underscored last week when Defense Secretary Pete Hegseth summoned hundreds of the U.S. military’s top leaders to a Marine Corps base in Quantico, Virginia, for what The Washington Post called a “highly unusual” meeting. Although the specific reason remains unknown, speculation centers on potential near-future conflicts, particularly given China’s recent successful intercontinental ballistic missile test using hypersonic boost-glide technology. This convergence of events creates what analysts describe as a perfect storm for defense contractors specializing in missile systems.

Lockheed Martin commands a significant share of Pentagon contracts with a diverse portfolio including the High Mobility Artillery Rocket System (HIMARS), Terminal High Altitude Area Defense (THAAD), Javelin anti-tank missiles, Hellfire air-to-ground missiles, and the Long Range Anti-Ship Missile (LRASM). In 2024, Lockheed’s defense revenue reached $71 billion, with its missiles segment contributing approximately $13 billion. The Pentagon’s production ramp-up directly benefits Lockheed, as HIMARS and Javelin systems have proven critical for Ukraine and NATO allies.

The company’s hypersonic programs, like the Conventional Prompt Strike, align perfectly with Defense Department priorities for countering China’s advancing capabilities. With over 570 U.S. facilities, Lockheed is exceptionally well-positioned to scale production rapidly. Increased orders could boost its missile segment revenue by 20% to 30% over the next few years, enhancing margins and stock value. Trading under $500 per share, LMT stock is up only 1.6% in 2025 and goes for 17 times next year’s earnings and less than 2x sales, presenting what many analysts consider an excellent buying opportunity.

Formerly known as Raytheon, RTX stands as the world’s largest guided missile manufacturer and the second-largest defense contractor behind Lockheed Martin. The company produces over 90% of U.S. missile defense interceptors, with key systems including the Patriot Advanced Capability (PAC-3), Standard Missile (SM-6), Tomahawk cruise missiles, AMRAAM air-to-air missiles, and Joint Air-to-Surface Standoff Missiles (JASSM). In 2024, RTX’s Raytheon segment—responsible for major weapons systems development—saw revenue hit $26.7 billion, driven primarily by missile systems and sensors.

The Pentagon’s push to quadruple production directly impacts RTX, as Patriot and SM-6 systems are vital for air defense against advanced threats like Chinese hypersonics. Recent international deals, including a $3.64 billion AMRAAM contract with Japan, bolster its already substantial $212 billion backlog. Scaling production could increase RTX’s missile revenue by 25% to 35%, with high-margin contracts significantly improving profitability. Up 41% year-to-date, RTX stock has already been benefiting from missile production needs, but analysts believe this new effort will supercharge its growth trajectory.

Northrop Grumman specializes in advanced missile systems and propulsion, including the Integrated Air and Missile Defense Battle Command System (IBCS), Advanced Anti-Radiation Guided Missile (AARGM), and Next Generation Interceptor (NGI) for ballistic missile defense. The company’s 2024 defense revenue reached approximately $41 billion, with almost all revenue defense-related and missiles contributing between $10 billion and $15 billion.

The Pentagon’s urgency to rebuild stockpiles aligns perfectly with Northrop’s strengths in hypersonics and rocket motors for ICBMs like Minuteman III. Expanded production, particularly for NGI and IBCS systems, could drive revenue growth of 15% to 25% in its missile segment. Northrop’s recent international sales and strategic investments in production capacity enhance its scalability as demand increases. As the Defense Department prioritizes countering China’s missile advancements, Northrop’s focus on next-generation interceptors positions it for sustained growth. NOC stock is riding 26% higher so far this year, yet analysts see compelling upside as global demand for missile defense systems continues to rise.