3 Under-the-Radar Defense Stocks With Record Backlogs

Key Points

• ATI, Astronics, and Ducommun each reported record backlogs in their latest earnings, but analysts caution that backlogs do not guarantee future profits.
• ATI stands out for pricing power through its hafnium and zirconium supply niche, expecting to deliver 70% of its $4.4 billion backlog within a year.
• Ducommun's record backlog masks decelerating guidance, while Astronics shows strong growth but carries high leverage with a 1.57 debt-to-equity ratio.

Life has two constants: death and taxes. But if you were to add a third, it might be the U.S. military expanding its annual budget. And now that the war in Iran has drastically depleted the coffers, the U.S. military is once again fiending for firepower. The Pentagon is requesting $1.1 trillion in discretionary spending for fiscal 2027, including a 188% increase in funds for missile procurement. This spending typically flows into the pockets of the aerospace industry, but not evenly.

Today, we’ll look beyond the prime contractors like Lockheed Martin Inc. NYSE: LMT and RTX Inc. NYSE: RTX to three lesser-known defense stocks. Each company posted a record backlog in its most recent earnings report, but record backlogs don’t always translate into record profits. We’ll dig into the numbers and find out which company is best positioned to actually monetize its growing order book.

ATI: Specialty Materials Producer With Pricing Power

Allegheny Technologies Incorporated, better known as ATI Inc. NYSE: ATI, is the largest company on our list, with a $27.8 billion market cap and more than $4.5 billion in trailing 12-month sales.

Much of the company’s recent growth has come from transforming the Flat Rolled Products segment into Advanced Alloys and Solutions (AA&S). Flat Rolled Products was a cyclical industrial segment making steel, nickel, and plate metal products. But AA&S has become a crucial defense supplier, and aerospace now makes up more than 44% of segment revenue according to the company’s Q2 2026 numbers.

ATI has built its niche around hafnium and zirconium, two minerals only a handful of firms worldwide can produce to aerospace and military standards.

Defense demand has run hot enough that the company has deliberately withdrawn capacity from other segments to reallocate it to defense orders with closer delivery dates. ATI expects to deliver 70% of its record $4.4 billion backlog within the next 12 months. Management believes AA&S margins are sustainable in the mid-20% range, giving the company pricing power that the other two on our list can’t match.

ATI also has the cleanest chart of the three stocks, with strong support along the 50-day moving average (MA) and a Relative Strength Index (RSI) that rarely stays below 50 for long. We’ve reached another inflection point with shares testing the 50-day MA, which has been a good entry point for investors on the past three occasions.

Astronics: Cleanest Defense Link But Highest Leverage

If you want to crank up the risk/reward level of your mid-cap defense stocks, Astronics Corp. NASDAQ: ATRO can provide the leverage.

The company recorded less than $950 million in sales in the last 12 months, but its rapid growth in onboard flight hardware and components has driven the stock up more than 65% year-to-date (YTD).

Astronics reported $260 million in revenue during its Q2 2026 earnings call, with more than $237 million coming from the Aerospace segment. Total revenue was up 27% year-over-year (YOY), book-to-bill was 1.18, and the backlog stands at a record $780 million (with the bulk again devoted to Aerospace). But this growth has been funded by debt, and the company’s debt-to-equity ratio is 1.57, implying a highly leveraged firm. Astronics needs to keep growing to maintain its valuation, and any slowdown in revenue or bookings could cause a sharp re-rating.

ATRO shares have a beta of 1.20, meaning the stock is 20% more volatile than the total S&P 500 index. High-beta stocks often create false technical signals, as we saw in July when the stock dipped below the 50-day moving average after a bearish cross on the Moving Average Convergence Divergence (MACD) indicator. Day and swing traders may find stocks like ATRO more enticing, but the long-term trend is still pointing up, and the company did just guide its first-ever $1 billion sales year.

Ducommun: Strongest Backlog Masks Guidance Deceleration

Ducommun Inc. NYSE: DCO is the prime example of why headline backlog numbers require further scrutiny. Backlogs and order books are leading indicators because they reflect bookings from future customers, not revenue the company has already realized.

But backlogs leave a lot to the imagination; they don’t tell us the quality of the orders, how long they will take to complete, or what margin the company can charge for future business.

Ducommun, a $2.5 billion market-cap electronic systems manufacturer, has the best backlog optics of the three stocks on today’s list, and its quarterly book-to-bill rate of 1.4 is higher than that of Astronics (ATI does not report book-to-bill).

The company has $1.16 billion in remaining performance obligations, but management’s guidance during the fiscal Q2 2026 earnings release dampened the headline numbers. Q2 revenue rose 12% YOY to a record $224.5 million, with missile revenue up 68% in the period and gross margins expanding to a company record 28%.

But then came the guidance: a reiteration of the previous quarter's figures, with high single-digit growth in fiscal 2026 but low single-digit growth in Q3 and Q4 due to commercial destocking and aerospace production being pulled forward. The order book might be growing quickly, but Ducommun doesn’t expect to convert those orders into revenue before the end of the fiscal year. Meanwhile, the missile program continues to do the heavy lifting, while the space, radar, and naval platforms segments all declined in Q2.

DCO shares are still up more than 70% YTD, but post-earnings profit-taking now risks turning into a full-fledged decline. The stock has closed lower than it opened in 11 of the last 12 trading sessions, and now the 50-day moving average support level has been broken. The RSI confirmed the downward pressure with a move below the 50 midpoint, signaling that sellers currently have control of the stock’s momentum. The next earnings report isn’t until Nov. 5, so expect more volatility in the weeks ahead for DCO.