Defense Earnings Show Readiness Now and Modernization Ahead

Key Points

• Lockheed Martin, Northrop Grumman and RTX all reported strong second-quarter results as defense demand remains elevated.
• Near-term missile defense and munitions demand is supporting backlogs as U.S.-Iran tensions and other global conflicts keep readiness in focus.
• Long-term modernization programs, including the B-21, F-35, next-generation interceptors and autonomous aircraft systems, remain key growth drivers.

Several of the nation's top defense contractors reported earnings amid a backdrop of the U.S. conflict with Iran appearing to be heading into a new phase. Meanwhile, on Capitol Hill, lawmakers are trying to secure funding to address the military's immediate needs while still grappling with the Trump administration’s longer-term goal of modernizing the military.

This gives investors two stories to consider. Lockheed Martin NYSE: LMT, Northrop Grumman NYSE: NOC, and RTX Corporation NYSE: RTX all posted strong quarters this week. But the numbers only tell half of the story.

One story focuses on readiness right now, as the Strait of Hormuz remains a flashpoint and U.S. forces remain engaged with Iran. The other is about modernization, the decade-long buildout of next-generation aircraft, interceptors, and autonomous systems.

Investors watching this earnings season need to weigh both. A company can look strong on paper while still being weighted toward one side of the story. Here's why investors can trust these three defense contractors for either scenario.

Lockheed, Northrop, and RTX Build Record Backlogs After Earnings

All three contractors delivered the kind of quarter that makes a bull case easy to write. Lockheed Martin posted $20.1 billion in sales and $7.94 in earnings per share (EPS). Its book-to-bill ratio hit 3.2x, indicating that new orders outpaced shipments by more than three to one. Backlog reached $230 billion, and management raised full-year sales guidance to $79.75–$81.75 billion.

Northrop Grumman leaned even harder on its backlog story. The company reported a record $105 billion backlog, up 17% year over year, alongside $10.9 billion in quarterly sales. Reported EPS fell 6% to $7.68, but that decline was purely an accounting artifact tied to last year's Training Services divestiture gain. Adjusted earnings guidance still moved higher.

RTX stole the show on growth. Adjusted sales climbed 16% organically to $24.7 billion; adjusted EPS jumped 21% to $1.89, and backlog surged 22% to $289 billion. The standout figure was $43 billion in new awards this quarter, nearly $20 billion of it at the Raytheon segment alone.

Missile Defense Demand Supports Near-Term Growth for Defense Stocks

The Strait of Hormuz has been an active flashpoint since February, and the recent collapse of the U.S.-Iran ceasefire has renewed pressure on missile defense and munitions. Not every defense stock is equally exposed to that story, and the differences matter for near-term revenue.

Lockheed Martin and Northrop Grumman form the backbone of the missile-defense supply chain. Lockheed's Missiles and Fire Control segment grew sales 19%, driven by PAC-3 and THAAD volume. Northrop manufactures THAAD interceptor rounds and posted a record $35 billion Defense Systems backlog tied to Sentinel and missile defense demand.

RTX carries the munition-replenishment story through its Raytheon segment. The company disclosed over $5 billion in new contracts for GEM-T effectors, the upgraded Patriot interceptor, headed to Ukraine, Poland, and the U.S. government. Raytheon's book-to-bill ratio hit 2.42, signaling that demand is outpacing even expanded production capacity.

Both RTX and Northrop flagged capacity expansion this quarter. That's a signal that demand, not contracts, is now the binding constraint on how fast these companies can respond to a live conflict.

Military Modernization Creates Long-Term Growth Opportunities

Beyond the current crisis sits a slower-moving story: the multi-year modernization of the U.S. military. This is where each company's flagship programs diverge the most, and where longer-term investors should focus.

Northrop's marquee program is the B-21 Raider, the next-generation stealth bomber. Management specifically cited an agreement to accelerate B-21 production capacity as a long-term value driver, positioning the company for a deterrence mission built for the 2030s and beyond.

Lockheed straddles both timelines. Its F-35 program continues to ramp, though some of this quarter's gain reflects the absence of prior-year losses rather than new demand. More telling is growth in the Next Generation Interceptor, the homeland missile shield meant to succeed today's PAC-3 and THAAD systems.

RTX's modernization bet centers on autonomy. Collins Aerospace's Sidekick software was down-selected for the Air Force's Collaborative Combat Aircraft program, the drone-wingman concept shaping future air combat. Pratt & Whitney also secured certification for its GTF Advantage engine this quarter.

What Defense Investors Should Watch After Earnings

The clearest signal from this earnings season is that backlog composition matters more than backlog size. A backlog full of interceptors and munitions reflects exposure to what's happening in the Gulf today. A backlog full of next-generation platforms reflects exposure to a modernization cycle that is still years from peaking.

What's notable is that all three companies are growing on both fronts simultaneously. That dual exposure, rather than a bet on one story over the other, is likely why Lockheed, Northrop, and RTX all raised guidance in the same week.