Defense stocks to watch before October earnings include Lockheed Martin, RTX and Northrop Grumman. All three enter the reporting window with record or sharply higher backlogs, but their valuation and execution risks differ.
RTX and Northrop Grumman report on October 20, while Lockheed Martin follows on October 22. Their results will test whether large order books are converting into revenue, margins and free cash flow.
Key Insights
- Defense stocks to watch enter Q3 earnings with reported backlogs ranging from $104.7 billion to $289 billion.
- Lockheed Martin and Northrop trade near 18.7 and 15.1 times trailing earnings, below RTX at roughly 32.5 times.
- RTX and Northrop report October 20; Lockheed Martin reports October 22 before the market opens.
Defense Stocks to Watch Enter Earnings With Large Backlogs
Backlog provides revenue visibility, but it is not the same as near-term profit. Contract mix, production costs and delivery timing determine how quickly those orders become cash.
Lockheed Martin’s second-quarter results showed a record $230.4 billion backlog. The total rose from $193.6 billion at the end of 2025 after $65 billion of new orders.
RTX reported a $289 billion backlog, up 22% from a year earlier. That total included $170 billion of commercial work and $119 billion of defense orders.
Northrop Grumman’s official release recorded $20 billion of quarterly awards. Backlog reached a company record of $104.7 billion.
The comparison requires care because RTX combines commercial aerospace and defense. Lockheed Martin and Northrop have more concentrated government exposure. Even so, each order book exceeds two years of recent annual sales.
This visibility separates the group from less mature technology names. Fusion’s quantum-computing stock screen focused on companies where revenue scale and execution remain less established.
Lockheed Martin: Backlog Growth Meets Program Risk
Lockheed Martin closed October 5 at $506.63, up 0.2% for the session. Its trailing price-to-earnings ratio was about 18.7, between Northrop and RTX.
Second-quarter sales increased 11% to $20.1 billion. Free cash flow reached $2.9 billion, while management lifted its 2026 outlook to roughly 8% sales growth and more than $7 billion of free cash flow.
Missiles and Fire Control delivered the strongest segment growth. Sales increased 19% as PAC-3, THAAD and Precision Strike Missile production accelerated.
The main earnings question is whether production ramps preserve margins. Prior contract charges show that a large backlog can still produce weak returns when cost estimates change.
Lockheed’s October 22 report should clarify F-35 deliveries, classified-program performance and cash conversion. The company announced the date on October 1, making it the latest confirmed catalyst among these defense stocks to watch.
RTX: Strongest Growth, Highest Earnings Multiple
RTX closed at $184.33 on October 5, down 0.2%. Its trailing earnings multiple of about 32.5 was the highest in this three-stock comparison.
Second-quarter sales rose 14% to $24.7 billion and adjusted earnings increased 21%. RTX raised adjusted sales guidance to $95 billion–$96 billion and adjusted EPS guidance to $7.10–$7.25.
The premium valuation reflects more than defense demand. Commercial engine and aftermarket exposure gives RTX a second growth channel, but it also adds execution and supply-chain complexity.
Investors should watch Pratt & Whitney cash requirements, Raytheon production rates and backlog conversion on October 20. A strong headline backlog will matter less if working capital absorbs the resulting cash.
The valuation test resembles the discipline used in Fusion’s Q4 AI stocks watchlist. Higher expected growth can justify a premium only when earnings and free cash flow follow spending demand.
Northrop Grumman: Lower Multiple, Tighter Margin Test
Northrop Grumman closed at $476.11, down 0.4%, with a trailing earnings multiple near 15.1. It was the least expensive of the three on that measure.
Second-quarter sales increased 5% to $10.9 billion. Management raised full-year sales guidance to $43.75 billion–$44.25 billion and adjusted EPS guidance to $28.60–$29.10.
The backlog reached a record after awards for Sentinel, restricted programs, the F-35 and Glide Phase Interceptor. Aeronautics sales increased 13% as B-21 and other programs expanded.
Margin performance remains the counterweight. The reported operating margin fell to 10.1% from 13.8%, while Defense Systems margin declined to 7.5% from 12.7%.
Northrop’s October 20 earnings should show whether Sentinel growth and higher awards can offset weaker contract mix. That conversion risk matters more than the stock’s lower headline multiple.
Investors should also separate organic operating strength from financing or deal effects. Fusion’s report on the Schneider Electric–PTC transaction showed how leverage can change an equity case even when strategic demand appears sound.
For all three companies, interest rates still affect equity valuations despite government-backed demand. Fusion’s Q4 gold outlook identifies the Federal Reserve’s October 27–28 meeting as the next broad rates catalyst after this defense earnings window.
The next observable event arrives October 20, when RTX and Northrop Grumman report before the opening bell. Lockheed Martin follows October 22, giving investors a direct comparison of backlog conversion, margins and cash flow within the same week.
Elsy kanana
Elsy Kanana is a financial and cryptocurrency journalist at FusionMarketNews, covering digital assets, blockchain technology, financial markets, and emerging fintech trends. Her reporting focuses on market movements, regulatory developments, and on-chain analytics, delivering clear, data-driven insights to readers worldwide.
