In this article, we will look at the 10 Undervalued Aerospace and Defense Stocks to Buy.
Aerospace and defense stocks were off to a strong start early in the year, driven by high backlogs and geopolitical tensions in the Middle East. As of March, the S&P 500 Aerospace and Defense sector was up 12%, outperforming the overall market, which had plunged into correction territory. Fast forward: tables have turned, and the sector has given back all its gains and is down about 2% for the year.
The underperformance came as production bottlenecks and uncertainty over the US military budget triggered a massive sell-off, despite the ongoing Middle East conflict. Shares of some of the biggest defense and aerospace companies have fallen despite the military’s massive expenditure ordinance.
“[The US has] burned through munitions much faster than we can produce them. Defense companies may receive some money up front, but they typically don’t profit until they deliver. “If that delivery takes time, why should stock prices have risen more than they already have on profits that won’t be realized for years?” said Steven Grey, chief investment officer at Grey Value Management.
Funds have also flowed out of defense-oriented ETFs as investors pivot towards safe-haven sectors such as energy and utilities.
Nevertheless, the Aerospace and Defense sector’s long-term outlook remains positive amid the expected higher defense spending. Government spending commitments are rising, driven by global geopolitical tensions and rapid technological advancements in AI-enabled and space-based systems.
“The longer-term growth picture remains intact … driven by a need for countries around the globe to rebuild their capabilities after decades of underinvestment,” Hargreaves Lansdown’s Chiekrie said.
High backlogs and strong demand for aircraft engines support the aerospace and defense sector’s long-term outlook. With that in mind, let’s take a look at some of the best undervalued aerospace and defense stocks to buy.
Our Methodology
To compile a list of 10 Undervalued Aerospace and Defense Stocks to Buy, we used Finviz and Yahoo Screener. From the screeners, we settled on the biggest aerospace and defense stocks. We trimmed the list to stocks with a forward price-to-earnings multiple of below 20. We also focused on stocks with upside potential of more than 10%, and that are popular among elite hedge funds in Q4 2025. The stocks are ranked in ascending order by their upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research shows 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 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
Undervalued Aerospace and Defense Stocks to Buy
10. General Dynamics Corporation (NYSE:GD)
Forward P/E: 18.89
Stock Upside Potential: 12.53%
Number of Hedge Fund Holders: 66
General Dynamics Corporation (NYSE:GD) is one of the undervalued aerospace and defense stocks to buy. On May 8, General Dynamics Corporation inked a strategic collaboration with Kodiak AI to accelerate the development of autonomous ground vehicles for defense applications.
The strategic partnership aims to integrate Kodiak AI-powered virtual driver technology with General Dynamics Land Systems’ ruggedized platform development capabilities. General Dynamics is to handle vehicle integration, power systems, and communications.
The collaboration focuses on delivering commercially inspired platforms that can be adapted for military use. The integration also paves the way for the two companies to pursue opportunities with the US Army and internationally.
Previously, General Dynamics has collaborated with Kodiak AI on the Leonidas Autonomous Ground Vehicle. The vehicle uses a modified commercial Ford F-600 truck for counter-drone operations. They settled on the Ford Truck platform to align with the Pentagon’s commercial-first strategy, which seeks to reduce acquisition costs and accelerate deployment timelines.
General Dynamics Corporation manufactures business jets (Gulfstream), nuclear submarines, armored combat vehicles, and provides IT/mission systems. It is a top contractor for the U.S. government and allies, specializing in shipbuilding and land combat technologies.
9. V2X, Inc. (NYSE:VVX)
Forward P/E: 10.52
Stock Upside Potential: 12.58%
Number of Hedge Fund Holders: 33
V2X, Inc. (NYSE:VVX) is one of the undervalued aerospace and defense stocks to buy. On May 5, analysts at Truist Securities reiterated a Hold rating on V2X, Inc. and hiked the price target to $70 from $68.
The price target hikes come on the heels of the company delivering impressive first-quarter results and hiking guidance due to incremental work in national security, Middle East operations, and T-6 programs. In the first quarter, V2X achieved $1.53 in earnings per share, up 55% year over year and better than the $1.24 a share expected. Revenue was up 23% year-over-year to $1.25 billion, better than the $1.13 billion expected.
The better-than-expected results came as the company secured 50 awards in the quarter, totaling $4.1 billion, and bringing the total backlog to $13.8 billion. Consequently, V2X management increased the full-year outlook in line with the momentum.
Full-year revenue is expected to range between $4.825 billion and $4.975 billion, up from the previous guidance of $4.675 billion to $4.825 billion. The company also expects diluted earnings per share of between $5.75 and $6.15, up from its previous guidance of $5.50 to $5.90.
V2X, Inc. Inc. is a leading provider of critical mission support and integrated solutions for defense, national security, and international clients. The company provides services across the entire mission lifecycle—preparation, operations, and sustainment.
8. Textron Inc. (NYSE:TXT)
Forward P/E: 12.70
Stock Upside Potential: 14.67%
Number of Hedge Fund Holders: 44
Textron Inc. (NYSE:TXT) is an undervalued aerospace and defense stock to buy. On May 5, Textron Inc.’s unit, Textron Aviation, opened a new service facility at Essendon Fields Airport in Melbourne, one of the most established aviation hubs.
The facility will expand factory-direct support for Cessna, Beechcraft, and Hawker customers across Australia and the Asia Pacific, strengthening Textron’s global service network and capacity.
The Essendon facility is more than double Textron Aviation’s previous facilities, covering more than 35,000 square feet and designed to support more than 1,400 Cessna, Beechcraft, and Hawker aircraft operating across the Asia-Pacific region.
The facility underscores the company’s Airport Master Plan that focuses on consolidating operations on the main field and improving safety and efficiency while responding to strong demand for new hangar space.
Textron Inc. is a multi-industry conglomerate designing, manufacturing, and servicing products in aerospace, defense, industrial, and finance sectors. Major brands include Cessna, Beechcraft, Bell, and E-Z-GO, providing military aircraft, specialty vehicles, and industrial turf care products worldwide.
7. Lockheed Martin Corporation (NYSE:LMT)
Forward P/E: 16.06
Stock Upside Potential: 24.06%
Number of Hedge Fund Holders: 59
Lockheed Martin Corporation (NYSE:LMT) is an undervalued aerospace and defense stock to buy. On May 12, during the Balikatan 2026 exercise, Lockheed Martin Corporation successfully demonstrated the integration of sensors, fires systems, and airspace management via a unified data platform.
The platform demonstrated its ability to compress sensor-to-shooter timelines, accelerate warfighter capability, and provide a real-time view of the battlefield. The Team Lockheed Martin NGC2 collaborated with the Capability Program Executive Command and Control Information Network, the Armed Forces of the Philippines, the I Marine Expeditionary Force, I Corps, and the 613 Air Operations Center to conduct the operational exercises.
It marked the first time that the Lockheed Martin team successfully demonstrated cross-domain data sharing in the 25ID operational movement. The company is poised to collaborate across the industry with companies such as Raft, Rune, and Amazon Web Services to integrate best-in-class capabilities into the platform.
Lockheed Martin Corporation is a global security and aerospace company primarily focused on the research, design, development, manufacture, and sustainment of advanced technology systems, products, and services. As a top defense contractor, it specializes in military aircraft (like the F-35), missiles, space systems, and radar technologies for the U.S. and allied governments.
6. Huntington Ingalls Industries, Inc. (NYSE:HII)
Forward P/E: 16.45
Stock Upside Potential: 25.47%
Number of Hedge Fund Holders: 39
Huntington Ingalls Industries, Inc. (NYSE:HII) is an undervalued aerospace and defense stock to buy. On May 5, Huntington Ingalls Industries delivered robust first-quarter 2026 results, driven by strong revenue growth.
Revenue in the quarter was up 13.4% year over year to $3.1 billion, driven by growth at Newport News Shipbuilding, Ingalls Shipbuilding, and Mission Technologies. Net earnings in the quarter came in at $149 million, or $3.79 a share, in line with last year’s same-quarter earnings. Huntington Ingalls Industries secured $4 billion worth of new contracts.
During the quarter, Huntington Ingalls Industries expanded its UK unmanned operations facility, strengthening its international presence. The company was also selected to compete for the $25.4 billion Advanced Technology Support Program V (ATSP5) microelectronics multi-award contract.
Following an impressive first quarter, the company has reaffirmed its full-year and medium-term outlook. It expects revenue growth of about 6% and medium-term shipbuilding revenue growth of 6%. Shipbuilding revenue is expected to range between $9.7 billion and $9.9 billion, with an operating margin of 5.5% to 6.5%.
Huntington Ingalls Industries, Inc. is the largest military shipbuilding company in the United States, specializing in the design, construction, and maintenance of nuclear-powered aircraft carriers and submarines for the U.S. Navy and Coast Guard. It also produces amphibious assault ships, national security cutters, and develops advanced defense technologies, including cyber solutions and uncrewed autonomous systems.
5. StandardAero, Inc. (NYSE:SARO)
Forward P/E: 16.57
Stock Upside Potential: 30.16%
Number of Hedge Fund Holders: 41
StandardAero, Inc. (NYSE:SARO) is an undervalued aerospace and defense stock to buy. On May 7, StandardAero, Inc. delivered impressive first-quarter 2026 results, with double-digit revenue growth across all end markets. The solid start to the year also saw the company enjoy sustained growth in commercial aerospace amid accelerated bookings momentum in the military end market.
Revenue in the quarter was up 13.3% to $1.63 billion, driven by strong demand for services and products across all three major end markets. The Business Aviation end market was up 19.6% as the Commercial Aerospace end market grew 11.4%. Amid robust revenue growth, net income rose 27% year over year to $79.9 million, up from $62.9 million in the same quarter last year.
The better-than-expected first-quarter results came as the Repair Service segment delivered double-digit adjusted EBITDA growth, demonstrating an attractive margin profile. StandardAero also strengthened its CRS offering with the acquisition of Unified Turbines, which adds hot section component repair capabilities.
According to chief executive officer Russell Ford, the company is positioned to perform across a range of economic environments owing to robust demand, a diversified end-market mix, and a leading position in critical engine platforms.
StandardAero, Inc. is one of the world’s largest independent providers of aerospace engine maintenance, repair, and overhaul (MRO) services, specializing in fixing engines, components, and airframes for commercial, military, and business aviation.
4. Northrop Grumman Corporation (NYSE:NOC)
Forward P/E: 18.61
Stock Upside Potential: 30.97%
Number of Hedge Fund Holders: 62
Northrop Grumman Corporation (NYSE:NOC) is an undervalued aerospace and defense stock to buy. On May 11, Northrop Grumman Corporation reiterated its push for opportunities around space missions with the unveiling of a positioning and navigation system.
LR-450 is the company’s new system designed to provide spacecraft tracing and orientation capabilities. The system does not require satellite signals; it uses millihemispherical resonant gyroscopes to measure rotation and orientation. The company resorted to much smaller sensors than those used in the Spacecraft Stellar Inertial Reference Unit.
The unveiling of the tracking system comes on the heels of Northrop Grumman’s HRG technology accumulating more than 70 million hours in orbit. The technology has also been used in missions, including the James Webb Space Telescope.
The LR-450 is poised to operate for millions of hours while supporting various missions ranging from low Earth orbit to planetary exploration. Its lower power requirement will support integration in various spacecraft configurations.
Northrop Grumman Corporation is a leading global aerospace and defense technology company, focused on developing advanced systems for the U.S. military and its allies. It specializes in aeronautics, space systems, defense systems, and cybersecurity, including the B-2 Spirit bomber, satellites, autonomous drones, and missile defense technologies.
3. Embraer S.A. (NYSE:EMBJ)
Forward P/E: 15.92
Stock Upside 32.96%
Number of Hedge Fund Holders: 35
Embraer S.A. (NYSE:EMBJ) is an undervalued aerospace and defense stock to buy. On May 11, Reuters reported that Embraer S.A. is in talks with Colombia and Chile to sell them its C-390 military transport aircraft.
The company has been stepping up output as it seeks to meet growing demand abroad. By targeting other Latin American nations, Embraer SA also hopes to take on competitors in the sector, such as Lockheed Martin, through foreign sales.
In Latin America, it faces significant headwinds stemming from the long timelines required to complete sales campaigns, driven by budget approvals and procurement processes. Nevertheless, the company could reach a deal more quickly in Colombia, as the country’s president, Gustavo Petro, is trying to modernize the military fleet.
In addition to pursuing sales opportunities in Latin America, Embraer SA has also inked an order of up to 20 C-390s from the United Arab Emirates. It marks the first sale in the Middle East, fuelled by the recent US-Iran War.
Embraer S.A. is a major Brazilian aerospace conglomerate that designs, manufactures, and sells aircraft for commercial, defense, and executive use, and provides after-sales services and support. As the third largest producer of civil aircraft in the world—after Boeing and Airbus—the company focuses heavily on regional, high-performance jets.
2. AAR Corp. (NYSE:AIR)
Forward P/E: 19.65
Stock Upside Potential: 41.88%
Number of Hedge Fund Holders: 36
AAR Corp. (NYSE:AIR) is an undervalued aerospace and defense stock to buy. On May 12, AAR Corp. hosted an Investor’s Day, during which top executives outlined the company’s strategy, growth initiatives, and financial targets.
The management team reiterated that the company remains focused on delivering parts, repair, and software for the global aviation aftermarket. They also reaffirmed fourth-quarter and fiscal 2026 guidance. Fourth-quarter sales are expected to grow between 19% and 21%, underpinned by 6% to 8% organic sales growth. Adjusted operating margin is expected to range between 10.2% and 10.5%.
For the full year, AAR Corp. expects sales to grow between 17% and 19%, and adjusted organic sales to grow between 11% and 12%. The company boasts an impressive record of strong financial performance, with sales growing at a compound annual rate of more than 15% since 2022. Adjusted EBITDA has also expanded by over 26% to $376 million as of the third quarter of fiscal 2026. Adjusted earnings per share have also increased at a compound annual growth rate of 19% since 2022.
AAR Corp. is a leading independent aerospace and defense aftermarket services provider that specializes in maintenance, repair, and overhaul (MRO), parts supply, and integrated solutions for commercial airlines and government fleets. Headquartered near Chicago, they improve aircraft availability and reduce global ownership costs.
1. Cadre Holdings, Inc. (NYSE:CDRE)
Forward P/E: 18.70
Stock Upside Potential: 75.67%
Number of Hedge Fund Holders: 15
Cadre Holdings Inc. (NYSE:CDRE) is one of the undervalued aerospace and defense stocks to buy. On May 11, Cadre Holdings Inc. delivered solid first-quarter 2026 results, including a record backlog.
Backlog in the quarter rose to $355 million, up from $166 million at the start of the year. The significant increase was attributed to the blast attenuation seat contract award and the TYR acquisition. The company also recorded strong demand in duty gear and armor. Cadre Holdings is also seeing strong and recurring demand for its suite of leading mission-critical safety products amid heightened geopolitical tensions and increased defense spending.
First-quarter net sales soared to $155.4 million from $130.1 million in the first quarter of 2025. The increase was due to recent acquisitions, offset by timing-related fluctuations in orders. Gross profit increased to $60.2 million from $56.1 million a year ago. On the other hand, net income dropped to $2 million, compared to $9.2 million in Q1 2025, due to higher compensation, interest, and transaction expenses.
For the full year, Cadre Holdings expects net sales to range between $736 million and $758 million, with adjusted EBITDA between $136 million and $141 million.
Cadre Holdings, Inc. is a leading global manufacturer and distributor of safety and survivability equipment for law enforcement, first responders, and military personnel, focused on body armor, duty gear, and explosive ordnance disposal (EOD) tools.
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