This article looks at the 10 best mid cap defense stocks to buy according to analysts. We also discuss the rebound in shares after a shaky beginning to the year.
Defense stocks have surged over the past week after President Trump unveiled plans for a $1 trillion defense budget for fiscal 2026, representing a 12% increase from the current year. Here is what he told reporters on April 7:
“Nobody’s seen anything like it. We have to build our military and we’re very cost-conscious, but the military is something that we have to build. And we have to be strong because you’ve got a lot of bad forces out there now. So we’re going to be approving a budget and I’m proud to say actually, the biggest one we’ve ever done for the military.”
READ ALSO: 10 Best Performing Defense Stocks So Far in 2025 and 10 Best Large Cap Defense Stocks to Buy Now.
This is an encouraging development for America’s defense sector, which had a subdued start to the year due to uncertainty around budget cuts. The creation of DOGE had also reshaped investors’ views of the industry.
Stocks got another boost last week after market chatter that tariff negotiations to address trade imbalances could include commitments from foreign countries to buy weapons from the US. On April 7, Vietnam’s prime minister issued a statement, asking for a 45-day delay in the imposition of tariffs and stating his country would buy more American goods, including arms, to tackle the trade gap.
Defense stocks have soared in Europe this year, as regional capitals unlocked billions to supercharge their militaries. While a steep selloff in response to the tariffs sparked a major plunge in shares last week, this has been a year to remember for several European defense companies that have seen double-digit returns so far in 2025.
Analysts at Citi believe defense stocks are poised for outperformance due to minimal tariff exposure, increased military budgets, and rising geopolitical tensions. Jason Gursky stated the following in a detailed preview to clients on April 10:
“We materially change the rank order of our stock picks, moving our defense coverage to the top of the list given our positive view on the outlook for global defense spending.”
Investors are also buoyed by the unveiling of a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. President Trump has also announced that he will resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security, given the strategic competition with China.
With that said, let’s now head over to the list of the best mid cap stocks from the defense sector.
A launch pad atop a grassy hill, smoke filled sky from a successful voyage to space.
Methodology
For this article, we sifted through screeners to identify mid-cap stocks in the aerospace and defense industry. These stocks have a market cap between $2 billion and $10 billion. From there, we picked the top 10 defense stocks with the highest positive share price upside potential. All data is as of the close of business on Friday, April 11, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Mid Cap Defense Stocks to Buy According to Analysts
10. Huntington Ingalls Industries, Inc. (NYSE:HII)
Market Cap: $8.47 billion
Share Price Upside Potential: 7.12%
Huntington Ingalls Industries, Inc. (NYSE:HII) is an American all-domain defense provider, with expertise in shipbuilding, unmanned systems, cyber, ISR, and synthetic training. It is the country’s sole builder of aircraft carriers and a major contractor for most nuclear submarines. With a share price upside potential of 7.12%, it is one of the best mid cap stocks to buy.
The stock surged 17% during the week of April 7 in response to President Trump signing an executive order to revive American shipbuilding, aimed at reducing China’s grip on the industry. On Friday, Goldman Sachs upgraded Huntington Ingalls Industries, Inc. (NYSE:HII) from Sell to Buy, and also raised its price target for the stock to $234 from $145.
Another positive during the week was Huntington Ingalls Industries, Inc. (NYSE:HII)’s delivery of the initial two Lionfish small uncrewed undersea vehicles to the Navy under a multi-year program, which could scale to 200 vehicles, with a contract value of $347 million. Late last month, the company also launched the USS Jeremiah Denton (DDG 129), the third Flight III Arleigh Burke-class destroyer for the US Navy.
Huntington Ingalls Industries, Inc. (NYSE:HII) recently signed a memorandum of understanding with HD Hyundai Heavy Industries to collaborate on accelerating ship production for defense and commercial projects. The strategic agreement reflects HII’s commitment to expand shipbuilding capacity in support of national security.
9. Embraer S.A. (NYSE:ERJ)
Market Cap: $7.69 billion
Share Price Upside Potential: 7.72%
Embraer S.A. (NYSE:ERJ) is a Brazilian jet manufacturer that produces aircraft for commercial, executive, and defense purposes.
The company’s shares have slumped 19% over the past month, with a major dip after Wolfe Research downgraded the stock to Peer Perform from Outperform on March 24, citing tariff risks. Despite the recent fall, Embraer S.A. (NYSE:ERJ) is one of the best mid cap stocks so far in 2025, with year-to-date gains of 13.5%, on the back of robust financial results for fiscal 2024 and several recent high-value contract awards.
In February, the company received a $7 billion order from Flexjet for 182 aircraft and 30 options. This is the largest firm order for both companies and will double the size of Flexjet’s fleet over the next five years. During the month, Japan’s ANA Holdings also ordered 15 E190-E2 planes to support its domestic operations. The deliveries are expected to commence in 2028.
On April 3, Embraer S.A. (NYSE:ERJ) signed an MoU with the South African aerospace and defense company, Denel, for potential future collaboration on the KC-390 Millennium, focused on aerostructure manufacture, repair, maintenance, and overhaul activities. This is a significant strategic partnership as the country looks to replace its legacy military aircraft.
According to a report on Reuters, the company is considering establishing an assembly line for its KC-390 military cargo aircraft in Poland due to a surge in plane sales in Europe. Moreover, the Portuguese Air Force recently joined Embraer S.A. (NYSE:ERJ) and the Brazilian Air Force in collaborative studies to provide the KC-390 Millennium with ISR capabilities.
Hedge Fund Resource Center