Defense sector ahead of earnings: Summary

Given the successive armed conflicts breaking out and escalating over time around the world, and the prospect of more to come, it is hardly surprising that defense spending is rising at the fastest pace in decades.
Hundreds of billions of dollars and euros from swelling defense budgets are flowing into defense industry companies. A number of these firms will report their results over the coming weeks.

Most companies in this segment have lost a very large portion of their valuations over the past few months. Even the best-performing industry leaders look weak on the charts, despite record revenues and profits.

The reason is that the investment thesis has become far more complex and demanding, which clearly translates into valuations.

Schedule

• 17.07 SAABB.SE Saab AB
• 21.07 NOC.US Northrop Grumman
• 22.07 AM.FP Dassault Aviation
• 23.07 HO.FP Thales
• 23.07 IDR.SM Indra Group
• 23.07 RTX.US RTX Corp
• 23.07 LMT.US Lockheed Martin
• 23.07 EXA.FP Exail Technologies
• 28.07 SAF.FP Safran
• 30.07 BAE.UK BAE Systems
• 30.07 HII.US Huntington Ingalls Industries
• 31.07 HAG.DE Hensoldt AG
• 06.08 RHM.DE Rheinmetall

Synthesis

The central theme for earnings releases across almost the entire sector is no longer demand, or even demand stability.

The message is clear: the market now expects effective and consistent conversion of backlog into profits, and defense of margins amid rising energy and raw material prices and persistent delivery-delay risk.

Saab and Northrop Grumman have already illustrated this:

• Saab delivered not only hyperbolic sales growth, but also margin expansion.
• Northrop, despite record revenues, declined. It showed a 2% margin drop and fell as much as 8% at the worst point of the move.

The same pattern can be expected from each subsequent company in the sector reporting results. However, many will have side and regional angles; they have little chance of influencing the direction of the move, but investors looking for an edge should pay close attention to them, as they can often gain importance over the long term.

Companies

Lockheed Martin

The bar is low for the company (so are the valuations). Consensus implies about 6 to 7% sales growth, but EPS is essentially flat versus Q2 2025. The market is not demanding perfection, it is demanding no further negative surprise.

• F-35, PAC-3, and the F-16 and C-130 modernization programs will be key.
• Additional write-downs related to “black” projects could also surprise.

Thales

Consensus for H1 2026 is orders of EUR 10.48bn and adjusted EBIT of EUR 1.32bn, with a 12.1% margin. Expectations are high, but within reason.

• The key will be keeping the book-to-bill ratio above 1 and the momentum of the “Cyber” segment.

Dassault Aviation

The “wild card” of the French defense sector.

• Expectations for the results vary widely depending on the source (revenues between EUR 3.15 and 3.5bn).
• Beyond the headline numbers, contracts related to Rafale and Falcon will be crucial. The market will also pay much closer attention to R&D costs due to the Falcon 10X.

RTX

The best asset quality, but the weakest asymmetry in terms of the market’s potential reaction after results.

• Maintaining double-digit growth will not be enough.
• Guidance and cost/cash control in the engines segment will be key.

Rheinmetall

Rheinmetall is the sector company that has lost the largest share of its valuation in recent quarters, despite being a leader in revenue and backlog growth. The German group appears to have an easier task, as most of the risk seems already priced in. Margins will be in the spotlight and will decide the direction for the price. Secondarily, investors will focus on contracts for a range of vehicle types for the German army.