Defense-related stocks have caught the attention of investors over the last year as geopolitical tensions around the world heat up. For example, the Zacks Aerospace sector has widely outperformed the S&P 500 since the beginning of 2022, as we can see in the chart below.

Image Source: Zacks Investment Research

And with countries increasing their defense budgets, these companies’ products and services will likely remain in high demand.

In addition, the Zacks Aerospace sector is currently ranked #1 out of all 16 Zacks sectors, indicating that companies within have witnessed positive earnings estimate revisions.

For those interested in tapping into the improved outlook, three top-ranked stocks – Northrop Grumman NOC, Raytheon Technologies RTX, and Curtiss-Wright CW – could all be considerations.

Northrop Grumman

Northrop Grumman is a global aerospace and defense company that provides advanced technology solutions for a range of industries. Presently, the stock carries a Zacks Rank #2 (Buy), with earnings estimates inching higher.

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The company posted solid quarterly results in its latest release, exceeding the Zacks Consensus EPS Estimate by more than 13%. Quarterly revenue totaled $10.1 billion, 4% ahead of expectations and improving nicely from year-ago sales of $8.6 billion.

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And for the cherry on top, Northrop has shown a commitment to increasingly rewarding its shareholders, boasting a 9% five-year annualized dividend growth rate.

Currently, NOC’s dividend yields 1.5% annually.

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Raytheon Technologies

Raytheon Technologies provides advanced systems and services worldwide for commercial, military, and government customers. Like NOC, Raytheon sports a favorable Zacks Rank #2 (Buy).

RTX shares aren’t expensive by any stretch, with the current 19.8X forward earnings multiple nearly in line with the five-year median and well below the Zacks Aerospace sector average.

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The company’s cash-generating abilities recently saw a solid bump; Raytheon reported free cash flow of $3.7 billion in its latest release, improving 70% year-over-year.

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Curtiss-Wright

Curtiss-Wright specializes in producing a wide range of high-tech products and services for various industries, such as aerospace, defense, and industrial markets. The company’s earnings outlook has modestly drifted higher, helping land it into a Zacks Rank #2 (Buy).

Image Source: Zacks Investment Research