3 Defense Stocks to Buy in August

Global defense spending has entered a structural growth phase driven by ongoing geopolitical conflicts and the need to modernize military technology. U.S. defense outlays for this year are around $1 trillion, and the Trump administration is proposing a massive $1.5 trillion budget for 2027.

This historic increase is aimed at replenishing depleted munitions, developing advanced technologies, and boosting the domestic defense industrial base. On top of this, international defense budgets are expanding rapidly, with NATO member nations committing to increasing their core defense spending to 5% of their gross domestic product by 2035.

With global defense spending slated to continue growing at a steady pace, here are three defense stocks for investors to scoop up in August.

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Lockheed Martin's backlog hit a record level in the second quarter

Lockheed Martin (NYSE: LMT) is a dominant player in the aerospace and defense industry and is the world's largest defense contractor by total sales. Lockheed's diversified defense platform is anchored by the F-35 Lightning II program, which is projected to generate $2.1 trillion over its 94-year lifecycle, providing predictable, stable revenue.

In addition to the F-35, Lockheed Martin manufactures other military aircraft, including the F-16 and F-22, while developing other top-secret advanced experimental projects. It also manufactures missile defense technologies, such as the High Mobility Artillery Rocket System and the Guided Multiple Launch Rocket System, as well as sea- and space-based missiles.

In the second quarter, Lockheed's sales grew to $20 billion, while net earnings increased to $1.8 billion. Meanwhile, its backlog reached a record $230 billion, a $64 billion increase year over year. The company also raised its full-year earnings guidance, projecting revenue between $79.75 billion and $81.75 billion, up 8% from the prior year.

Lockheed offers a reliable dividend that it has raised for 23 consecutive years, making it an attractive stock for income-focused investors. If you're seeking exposure to growing defense budgets, Lockheed is an excellent stock to scoop up in August.

GE Aerospace benefits from a dominant engine platform

GE Aerospace (NYSE: GE), formerly part of General Electric before its 2024 spinoff (alongside GE Vernova and GE HealthCare), holds a dominant position in the global aircraft engine market. The company's joint venture with Safran Aircraft Engines, CFM International, produces the Leading Edge Aviation Propulsion (LEAP) engine used in major aircraft like the Boeing 737 MAX and Airbus A320, and commands a 39% market share.

This strong market position makes GE Aerospace an attractive long-term investment thanks to its highly profitable aftermarket business. Because aircraft engines require continuous maintenance and upgrades throughout their lifecycle, this business provides GE Aerospace with steady recurring cash flow.

In the second quarter, the company posted stellar results, with revenue growing 24% year over year to $13.3 billion while free cash flow surged 43% to $3 billion. Its strong results were driven by strong engine deliveries, with LEAP engine deliveries up 41%. Orders increased 17%, and the company's backlog is now over $210 billion, with commercial services accounting for over 80% of this amount.

In addition, its defense footprint continues to grow. For example, its F404 engines were selected by Turkish Aerospace Industries for its HÜRJET advanced jet trainer program, and the CT7 engines were chosen to power the U.K. Ministry of Defense's new medium helicopter program. For investors seeking exposure to a mature business with a steady services backlog, GE Aerospace is another excellent stock.

Red Cat offers a pure-play drone stock investment

If you're looking for a speculative stock in the defense industry, Red Cat Holdings (NASDAQ: RCAT) is an intriguing opportunity. The U.S. is ramping up spending on drones, including collaborative combat aircraft, counter-drone systems, and low-cost drones for mass production, and Red Cat provides investors with exposure as a pure-play defense drone manufacturer.

To comply with the National Defense Authorization Act, Red Cat has completely removed Chinese components from its supply chain to partner with the United States military. Its participation in the Pentagon's $1.1 billion Drone Dominance Program could be a major catalyst, as the U.S. government looks to procure hundreds of thousands of low-cost tactical combat drones by 2027.

Red Cat is making progress but still carries risk. While it was one of 19 companies to advance to phase 2, the field will ultimately narrow down to five long-term suppliers by 2027. The company is also unprofitable, incurring losses as it scales up its drone manufacturing capabilities.

Red Cat is a high-risk, high-reward stock if it can navigate the Pentagon's competitive procurement process and secure major government contracts for its drones. For aggressive investors willing to tolerate the risk, Red Cat, down 57% from its 52-week high, is an intriguing growth defense stock to scoop up today.

Courtney Carlsen has positions in GE Vernova. The Motley Fool has positions in and recommends Boeing, GE Aerospace, GE HealthCare Technologies, GE Vernova, and Safran. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.