Defense shares stayed in focus ahead of major earnings reports. An index of aerospace and defense stocks gained 42% last year, fueled by expectations of higher government spending on military technology and sustained geopolitical tensions.
Investors now want confirmation that demand will match the optimism embedded in valuations. Contractors, including Lockheed Martin Corp., L3Harris Technologies Inc., Northrop Grumman Corp., and RTX Corp., are scheduled to report this week and offer guidance for the year ahead.
Analysts said valuations across the group look mixed after the rally. Lockheed and General Dynamics trade at 20 and 21 times estimated profits over the next 12 months, respectively, which remains below the S&P 500’s . RTX and L3Harris trade at valuation multiples of about 30 times earnings.
Still, risks remain. The Golden Dome program, an ambitious missile defense initiative often cited by bullish investors, does not yet exist as a functioning technology. Experts have also questioned whether the administration’s timeline appears realistic. Any major jump in defense spending would also require congressional approval.