Although a controversial sector, the concept of top defense stocks will likely become an increasingly important one. Primarily, circumstances in the geopolitical realm will likely worsen. At the same time, a critical election cycle could mean significant changes. Therefore, emotionally agnostic investors may consider the potential viability of this ecosystem.

Several worrying catalysts come to mind. First, tensions in the Middle East could boil over, threatening regional stability. In addition, global oil supply chains could be disrupted, leading to severe economic consequences. Second, the war in Ukraine has shown no sign of abating. Add the possibility of an isolationist shift in U.S. foreign policy, and the conflict there may worsen.

At the same time this is going on, China has ambitions of its own. In other words, the U.S. can’t afford to let off the gas pedal. Cynically, such a framework may only serve to bolster top defense stocks. Below are several ideas to consider.

Lockheed Martin (LMT)

Specializing in some of the most advanced systems in the aerospace field, Lockheed Martin (NYSE:LMT) is widely known for its fighter jets, such as the F-35 Lightning II. It also offers missile defense systems along with space communications systems. Due to the importance of air and space superiority in any future conflict that Western powers may find themselves in, demand for LMT stock should rise.

It’s not just a random musing. Lockheed enjoyed a strong showing in its second quarter, producing earnings per share of $6.85. This handily beat the projection calling for $6.46. Overall, the earnings surprise came out to 6%. In the past four quarters, the average EPS stood at $6.93, eclipsing the collective consensus view of $6.54.

What makes LMT stock attractive is that it still trades for a relatively reasonable valuation. For example, between Q2 2023 and Q2 2024, the average sales multiple sat at 1.69x. Right now, the multiple comes in at 1.8x — higher but still reasonable.

For fiscal 2024, analysts anticipate that sales may rise to $71.08 billion, up 5.2% from the prior year. However, the high-side estimate of $72.13 billion could be realistic. With that, LMT is one of the top defense stocks to consider.

Northrop Grumman (NOC)

Another top-tier name in the aerospace and defense industry, Northrop Grumman (NYSE:NOC), specializes in several fields. These include unmanned systems, cybersecurity, missile defense and space-related systems. Increasingly, nefarious agents are taking to connected networks to render damage or essentially hold entities financially hostage. Northrop can potentially address this critical area.

What makes Northrop one of the credible defense stocks is the underlying financial performance. In Q2, the company posted EPS of $6.36, beating out the consensus target of $5.93. This yielded an earnings surprise of 7.2%. In the past four quarters, Northrop generated an average EPS of $6.03, exceeding the average target of $5.68.

Interestingly, NOC stock appears relatively undervalued. Right now, shares trade hands at 1.76x trailing-year sales. However, in the past year since Q2, the average multiple stood at 1.81x.

Circumstances could get even more favorable. In fiscal 2024, sales may rise to $41.31 billion, up 5.1% from the prior year’s haul of $39.29 billion. In fiscal 2025, revenue could bump up again to $42.95 billion. It’s one of the top defense stocks to consider.

RTX (RTX)

Formerly known as Raytheon Technologies, RTX (NYSE:RTX) has long represented one of the top defense stocks. One of its main specialties is missile systems. In addition, the company offers solutions involving radar, avionics and integrated defense networks. With tensions in multiple global regions turning sadly kinetic, the idea of missile defense systems will likely rise. Therefore, RTX stock should be cynically relevant.

As with other top defense stocks, RTX has put on a solid showing in Q2, posting EPS of $1.41. In contrast, analysts were anticipating earnings of $1.30 per share. That led to an earnings surprise of 8.61%. In the past year, the company posted an average EPS of $1.29, beating out the consensus view of $1.22.

It must be said that this enhanced performance comes at a cost. RTX trades at 2.16x sales, which is a bit pricier than some of its rivals. However, it’s not a terrible premium when considering the prior year’s print of 1.89x.

Moreover, experts see sales shooting up to $79.41 billion, up 6.9% from last year’s tally of $74.31 billion. It’s easily one of the players to keep on your radar.

General Dynamics (GD)

Providing a vast portfolio of defense products and services, General Dynamics (NYSE:GD) has been one of the most relevant names among top defense stocks. That’s because it specializes in combat vehicles and, especially, weapons systems and munitions. The latter two categories have seen extensive use recently, underscoring their practicality and effectiveness when conflicts become kinetic.

Now, it must be stated that GD stock is a higher-risk, higher-reward entity among top defense stocks. Unlike some of its peers, it slightly missed expectations in Q2, posting EPS of $3.26 against a target calling for $3.31. To be sure, the company also slightly missed earnings expectations in the past three quarters. However, Q3 2024 was strong, lifting the overall average into positive EPS territory.

Currently, GD stock trades at 1.77x sales. That’s on par with many other defense enterprises. In the past year, the metric sat at 1.68x.

The distinguishing factor for General Dynamics could be its sales front. Analysts see fiscal 2024 revenue hitting $48.07 billion. That’s up 13.7% from the prior year.

L3Harris Technologies (LHX)

Specializing in advanced defense and commercial technologies, L3Harris Technologies (NYSE:LHX) covers all domains: air, land, sea, space and cyber. This integration of multiple domains will likely be critical in future conflicts. We’ve already seen how unmanned drones have been supremely effective against numerically superior forces. Thus, L3Harris should see increased demand as Western powers seek a technological edge.

A key element moving in LHX stock’s favor is the financials. While not blisteringly impressive, L3Harris is getting the job done. In Q2, the company posted EPS of $3.24, beating the consensus view of $3.18. Over the past four quarters, the defense specialist’s average EPS landed at $3.14. This eclipsed experts’ target calling for $3.05.

Right now, LHX stock trades hands at 2.06x sales. That’s a bit high compared to some other top defense stocks. However, in the past year, the metric was 2.1x. So, the valuation is relatively reasonable.

For fiscal 2024, analysts anticipate that sales may rise to $21.23 billion, up 9.3% from the prior year. In the following year, the top line could expand to $22.09 billion, up 4%.

Textron (TXT)

A multi-industry company mainly covering the aerospace solutions segment, Textron (NYSE:TXT) is perhaps best known for partnering with other companies to develop the V-22 Osprey aircraft. The company also has its hands in developing advanced land vehicles. In future conflicts, rapid deployment of special military operators may be crucial. Therefore, TXT stock could see significant demand in the years ahead.

Financially, Textron is usually consistent, though sometimes it slightly misses expectations. In Q2, it was firing on all cylinders, posting an EPS of $1.54 against a consensus view of $1.47. This produced an earnings surprise of 4.7%. In the past year, Textron posted an average EPS of $1.44, beating the average forecast of $1.32.

Relative to other top defense stocks, TXT appears to be a bargain, trading at 1.28x sales. Between Q1 2023 to Q1 2024, the average metric sat at 1.2x.

Looking out to year’s end, sales may reach $14.5 billion, up 6% from last year’s tally of $13.7 billion. In the following year, the top line might rise to $15.35 billion, up another 6%.

Kratos Defense (KTOS)

One of the higher-risk, higher-reward ideas among top defense stocks, Kratos Defense (NASDAQ:KTOS) just might see some awareness burgeon over the next several years. The company focuses on unmanned systems, which as stated before, is becoming a critical component of defense. Should conflicts erupt in more parts of the world, it’s reasonable to assume that demand for KTOS stock will blossom.

While it’s a smaller enterprise compared to its peers on this list, that’s what makes Kratos so compelling. Its Q2 report will be coming up shortly on Thursday. However, if it’s anything like Q1 — when Kratos posted EPS of 11 cents against a target of 5 cents — investors may see a significant pop higher. In the past year since Q1 2023, the average earnings surprise has clocked in at around 70%.

Now, the performance comes at a cost: KTOS stock trades hands at 2.8x revenue. That’s also higher than the prior year’s average multiple of 2.15x.

Still, analysts believe that by year’s end, sales may rise to $1.15 billion, up 11.1%. In the following year, the top line could jump to $1.28 billion, up 10.7%.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.