Buy 3 Mid-Sized Defense Equipment Stocks Amid Geopolitical Conflicts

AIR, ATRO and DCO stand out as mid-sized defense stocks, backed by rising spending and strong earnings growth.

Nalak Das

3 min read

The defense equipment industry remains resilient, supported by rising defense spending and strategic mergers and acquisitions that improve operational scale, diversify product offerings and increase market presence, even as supply-chain challenges persist.

The Zacks-defined Defense Equipment industry is currently in the top 13% of the Zacks Industry Rank. Since the Defense Equipment industry is ranked in the top half of the Zacks Ranked Industries, we expect it to outperform the market over the next three to six months.

At this stage, we have narrowed our search to three defense equipment stocks with a top Zacks Rank that have provided double-digit returns in the past three months. The companies are: AAR Corp. AIR, Astronics Corp. ATRO and Ducommun Inc. DCO. Each of our picks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our three picks year to date.

Image Source: Zacks Investment Research

AAR Corp.

AAR continues to witness strong performance in its parts supply business, backed by growing commercial air travel. Rising demand for aircraft maintenance, and record-high maintenance, repair and operations (MRO) spending have been boosting AIR’s Repair, Engineering & Software business segment.

Global air passenger traffic growth is anticipated at a full-year rate of 2.1% for 2026, as predicted by the International Air Transport Association (“IATA”). NATO members also increased their defense-spending commitment, supporting the long-term government demand outlook.

Such projections should bolster growth opportunities for AIR’s Parts Supply business in the near future. AIR expects continued strength in new-parts distribution to help drive low-double-digit to low-teens sales growth in fiscal 2027.

AAR has an expected revenue and earnings growth rate of 11.6% and 17.2%, respectively, for the current year (ending May 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 0.2% over the last 30 days.

Astronics Corp.

Astronics is a manufacturer of specialized lighting and electronics for the cockpit, cabin and exteriors of military, commercial transport and private business jet aircraft. ATRO operates in two segments, Aerospace and Test Systems. ATRO provides products for the aerospace, defense, and electronics industries in the United States, the rest of North America, Asia, Europe, South America, and internationally.

A major lighting and electronics supplier to the aircraft industry, ATRO’s strategy is to expand from a components and subsystems supplier to an aircraft lighting systems integrator, increasing the value and content it provides to various aircraft platforms.

Astronics has an expected revenue and earnings growth rate of 19.5% and 64.1%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 7.5% over the last 30 days.

Ducommun Inc.

Ducommun manufactures components and assemblies principally for domestic and foreign commercial and military aircraft and space programs. Ducommun is a subcontractor to Lockheed Martin on the Space Shuttle external tank and a supplier of components for the Space Shuttle, as well as for the International Space Station.

In addition to aerospace and defense, DCO also services industrial, medical, and other industries in the United States. DCO operates through two segments, Electronic Systems and Structural Systems.

Ducommun has an expected revenue and earnings growth rate of 6.9% and 13.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 4.7% over the last 30 days.

Radical New Technology Could Hand Investors Huge Gains

Quantum Computing is the next technological revolution, and it could be even more advanced than AI.

While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.

Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.

Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.

See Top Quantum Stocks Now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report