Don't Buy SpaceX Until You Consider These 2 Aerospace and Defense Stocks With 10% EPS Growth

Space Exploration Technologies, better known as SpaceX, had a huge initial public offering (IPO) earlier this month, making founder Elon Musk the first trillionaire. However, since its splashy debut, the stock had fallen to $147.11 on June 23 and, even after a rebound, is below its opening day's closing price of $160.95.

The sky isn't the limit for aerospace and defense industry stocks, and there are several less-risky stocks than SpaceX, including companies with strong track records of earnings-per-share (EPS) growth.

Howmet Aerospace (NYSE: HWM) and TransDigm Group (NYSE: TDG) have earnings growth profiles that easily outpace larger aerospace and defense companies. Over the past five years, Howmet's EPS have risen by more than 540% while TransDigm's have jumped more than 270%.

Here are three reasons to buy each stock.

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Howmet is helping keep aging fleets aloft

Howmet Aerospace has established itself as an elite, high-moat supplier of industrial and aerospace ecosystems. While delays in new aircraft production by major original equipment manufacturers (OEMs) have constrained the broader industry, they have created a massive windfall for Howmet's aftermarket business. Commercial airlines are flying older fleets longer to meet robust travel demand, so more aircraft require intensive maintenance and engine overhauls.

In the first quarter, Howmet reported revenue of $2.3 billion, up 19% year over year, and earnings per share (EPS) of $1.44, up 71%. In 2025, Howmet's commercial aerospace spare parts sales skyrocketed 48% year over year, bringing spares to roughly 23% of total revenue. Because aftermarket spare parts carry significantly higher margins than initial equipment builds, this structural mix shift is a powerful margin expander.

The data center boom needs its gas turbines

Beyond aviation, Howmet is emerging as a critical pick-and-shovel play on the artificial intelligence and data center land grab. Data centers require massive, uninterrupted amounts of electricity, driving a secular surge in demand for industrial gas turbines to back up power grids.

Howmet's gas turbine segment delivered 39% year-over-year revenue growth in the first quarter. Management expects its roughly $1 billion gas turbine business to potentially double over the next three to five years, giving the company a highly visible, non-aerospace growth engine backed by long-term corporate energy contracts.

A strategic beat and raise M&A record

In April, the company finalized its $1.8 billion acquisition of Consolidated Aerospace Manufacturing (CAM), expanding its high-value fastening systems portfolio and deepening its lucrative footprint in the defense and space sectors.

The Consolidated Aerospace integration, along with its $120 million purchase of Brunner in February, is projected to add roughly $275 million in revenue and $60 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to the remainder of 2026 alone. This aggressive portfolio optimization, coupled with $450 million in share repurchases executed in early 2026, supports a robust beat-and-raise trajectory that has drawn sizable institutional backing, as institutions own more than 90% of outstanding shares.

TransDigm's proprietary intellectual property moat

TransDigm does not manufacture commoditized aviation parts; it focuses strictly on highly engineered, niche components. Roughly 90% of TransDigm's net sales come from proprietary products for which it owns the intellectual property (IP).

Even more compelling, the company is the sole-source supplier for approximately 80% of the products it sells. If an airline needs a specific replacement valve, actuator, or cockpit control component for a commercial airliner, it frequently has no choice but to buy it from TransDigm, giving the company practically unparalleled pricing power.

In the second quarter, TransDigm reported revenue of $2.54 billion, up 18.3% year over year, and EPS of $9.20, up 11.6% over the same period a year ago.

Its high-margin aftermarket engine

While manufacturing parts for new aircraft (OEM) is a solid business, the real goldmine for TransDigm is the commercial aftermarket. Airplanes are legally required to follow strict maintenance schedules based on flight hours. Because commercial airlines are flying existing fleets longer to cope with ongoing OEM delivery bottlenecks, TransDigm's commercial transport aftermarket sales jumped 16% year over year in the second quarter. This aftermarket business is incredibly lucrative, driving a stunning consolidated EBITDA margin of 52.6%, a software-like margin that is rare in heavy manufacturing.

Aggressive M&A value creation

TransDigm, like Howmet, accelerates its growth through a highly disciplined and aggressive acquisition playbook. It buys small, niche aerospace component makers that own proprietary IP, integrates them into its value-driven operating model, and strips out structural inefficiencies.

TransDigm drastically raised its fiscal 2026 revenue guidance midpoint by $420 million (now targeting $10.3 billion to $10.42 billion), fueled heavily by its base business and the integration of highly synergistic acquisitions such as its January purchase of Jet Parts Engineering and Victor Sierra Aviation for $2.2 billion.

Management is also aggressively deploying capital, returning $905 million to shareholders via buybacks in the first half of fiscal 2026 while completing its $960 million acquisition of Stellant Systems to expand its defense aftermarket tech footprint.

James Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Howmet Aerospace and TransDigm Group. The Motley Fool has a disclosure policy.