3 Defense Stocks Retail Investors Are Watching For Long Term Government Spending

With inflation still elevated, central banks keeping policy tight and energy prices influenced by ongoing Middle East conflict, many investors are looking for companies closely linked to long term government spending and security priorities. The Aerospace And Defense screener focuses on businesses that manufacture or provide services to the sector, which can offer exposure that is less tied to day to day consumer sentiment. This article picks out 3 of the most interesting stocks from that screener and explains what each company does, how it fits the theme and which key risks and fundamentals to watch.

L3Harris Technologies (LHX)

Overview: L3Harris Technologies provides mission critical space, missile and communications systems to governments and commercial customers worldwide, spanning satellite payloads, hypersonic and propulsion technologies, tactical radios, night-vision equipment and public safety networks. The company plays a central role in U.S. and allied defense programs, with a history dating back to 1895 and headquarters in Melbourne, Florida.

Market Cap: US$50.6b

L3Harris Technologies may appeal if you are looking for exposure to long term defense spending, particularly in space and missile systems, where the company has secured record backlog, large multi year propulsion agreements and contracts for missile warning satellites. Earnings and revenue are forecast to grow at mid to high single digit rates, and recent Q2 2026 results showed stronger profit growth and raised guidance. At the same time, high debt levels, reliance on fixed price development contracts and exposure to government budget decisions mean risk is not trivial. The key consideration is how these growth projects, funding choices and analyst expectations fit together, which many investors are still evaluating.

L3Harris appears to be accelerating with a record backlog and multi year missile and space contracts. However, the key story lies where growth intersects with balance sheet pressure. Get the full context in the 6 key rewards and 1 important warning sign

Moog (MOG.A)

Overview: Moog is an aerospace and defense supplier that builds the precision motion control systems that make aircraft, missiles, satellites, industrial robots and medical devices move accurately and safely, serving both original equipment manufacturers and aftermarket customers worldwide.

Market Cap: US$13.2b

Moog provides direct exposure to long term defense, aerospace and automation trends, with record Q3 2026 sales of about US$1.116b, a 12 month backlog up 23% and raised full year guidance indicating solid demand in missile actuation, space systems and industrial automation. Earnings growth has recently run ahead of market and sector averages, net margins are improving and ROE is forecast to rise. However, the stock trades on a rich P/E multiple, carries high debt and has seen significant insider selling. The tension between premium pricing, cash flow conversion challenges and strong defense exposure is what makes Moog notable, particularly for investors assessing whether current expectations leave sufficient room for upside.

Moog’s premium P/E, record sales and rising backlog suggest the market senses something bigger is building. The real question is what the 2 key rewards and 2 important warning signs reveals about how much optimism is already priced in.

Thales (ENXTPA:HO)

Overview: Thales is a French aerospace, defense and cybersecurity group that supplies radars, air defense and naval systems, avionics, satellites and secure digital identity solutions to governments and large enterprises worldwide.

Operations: Thales generates most of its revenue from Defence excluding Digital Identity & Security at about €13.3b, followed by Aerospace at about €6.1b and Cyber & Digital activities at about €3.9b, with a small negative balance in other items.

Market Cap: €50.5b

Thales brings together defence electronics, air traffic management and high margin cybersecurity at a scale few peers can match, which is why rising European defence budgets and contracts such as Singapore’s NexGen air traffic system and Romania’s GM200 MM/A radars matter. Some observers note that earnings growth has been strong and that analyst forecasts point to faster growth than the French market. It is also noted that the current share price sits below certain cash flow based value estimates and many analyst targets. At the same time, investors need to weigh one off hits such as the F126 frigate cancellation, recent profit pressure in Cyber & Digital and Space, and heavy reliance on government defence spending. The key consideration is how these potential growth drivers, risks and cash flows might interact over the coming years.

Thales looks like a defence and cybersecurity heavyweight that some investors still treat cautiously. The real story sits in the 3 key rewards and 1 important warning sign and how one underappreciated pressure point could flip the whole thesis.

The three stocks in this article are just a starting point, since the full Aerospace And Defense screener surfaces more than 300 other Aerospace And Defense companies with equally compelling stories to investigate. Use Simply Wall St to identify, filter and analyze the specific catalysts and narratives that matter to you so you can focus on the highest conviction opportunities in this theme.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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