War trades resumed in July, and bids from two prominent US defense contractors topped the tape. After weak Q1 reports and Iran’s ceasefire, aerospace and defense stocks deepened their declines as the market returned to stock re-trading and institutional selling intensified. But now that the war is back and Q2 reports from defense companies are coming in, prices are recovering. Does the defense trade have the staying power this time around?
What RTX and Lockheed Martin Earnings Tell Us About the Defense Commercial Route Ahead
Lockheed Martin Inc. NYSE: LMT and RTX Inc. NYSE: RTX are the two largest US defense contractors, and both their stocks rose at the beginning of the year. But the outbreak of war in Iran in late February was a major blow to defense trade, and shares of both companies fell 25% and 19% from their all-time highs, respectively, after hitting record highs in Q1. Poor Q1 earnings from Lockheed led to a deep decline, while commodity prices also weighed on RTX’s commercial order book.
Q2 reports changed the script, with both companies beating earnings per share (EPS) and revenue estimates and adding to their backlog records. And most importantly, it is not the dollar of income or the backlog of space that has contributed to the resumption of conflict in Iran.
One important caveat to this idea: the National Defense Authorization Act of 2027 (NDAA) has not been stopped following the failure of a shutdown vote in the Senate. The debate is likely to be nothing more than noise and posturing between the Trump administration and Congress. However, if the NDAA is not signed by October 1, no multi-year defense procurement contracts will be distributed, and these contracts are the backbone of the RTX and LMT backlog.
RTX: Clean Earnings Beat Has Stock Hit New High
The decline in RTX shares has officially ended following its Q2 2026 results. The beat was highlighted by 14.5% year-over-year (YOY) revenue growth, which exceeded analyst estimates by more than 8%. EPS of $1.89 also crushed the $1.66 expected, and backlog grew 22% YOY to a record $289 billion.
RTX today
- 52 week interval
- $150.61
▼
$214.89
- Dividend Yield
- 1.37%
- The P/E ratio
- 37.52
- Target Value
- $218.63
More than $43 billion in new orders were booked in the quarter, including $20 billion for Raytheon’s (ie, defense) division. This is the company’s 8th beat in a row, which may be why investors are willing to pay the stock’s 30 times earnings.
An 8% earnings beat is rare, even for RtX, and gave management the confidence to raise guidance for full-year sales, EPS, and free cash flow. The company now generates 2026 EPS of $7.10 to $7.25, which is a 5% increase over its previous high-end estimate.
RTX shares jumped 7% on the release, but the looming crisis is putting a damper on the celebration. The backlog is a mix of commercial and defense contracts, and the Collins Aerospace and Pratt & Whitney divisions account for $170 billion of the $289 billion total. Collins and Pratt are wings of the aerospace company, through weapons maker Raytheon, which means that more than 58% of the total backlog is exposed to asset risks from high fuel prices and low aircraft capacity—two things exacerbated by the Iran war.
Shares of RTX are a hair below their previous high following a 7% earnings pop, and technical signals are pointing to further short-term gains. The stock is now trading comfortably above the 50-day and 200-day moving averages, which are transitioning to the Golden Cross. The MACD indicator has also reached a positive point above the histogram, with a bullish cross hinting at a further look ahead.
Lockheed Martin: Headline Numbers Mislead, But Backlog Stronger Than Ever
At first glance, Lockheed Martin swept the market in Q2 2026, beating high and low estimates with EPS of $7.94 on $1.8 billion in revenue.
Lockheed Martin Today
Lockheed Martin
As of 07/24/2026 03:59 PM Eastern
- 52 week interval
- $412.55
▼
$692.00
- Dividend Yield
- 2.37%
- The P/E ratio
- 21.48
- Target Value
- $624.94
This represents YOY earnings growth of more than 400%, but that figure is tempered by the $1.6 billion loss Lockheed incurred in Q2 2025, which depressed the prior-year base. Still, the stock is up 10% on the day for a reason.
First, the backlog continues to reach record levels, growing to $230 billion, up from $193 billion by the end of 2025. The Q2 release was particularly impressive as Lockheed booked $65 billion in new orders during that period. Missiles and Fire Control (MFC) remains the flashpoint, with a backlog of $87 billion for THAAD interceptors, GMLRS, HIMARS, and radar systems.
Additionally, Lockheed’s cash flow reflects actual earnings in the prior-year quarter. Operating cash flow was $3.2 billion, while free cash flow for the quarter came in at $2.25 billion. Management also raised the high end of full-year revenue guidance to $81.75 billion, from $80 billion in the previous quarter.
LMT shares have experienced a deep decline this spring, falling from a peak of $676 on March 2 to $491 at the end of June. The stock is lower than RTX due to poor Q1 earnings, but it could also outperform given the unique exposure to the Iran war. The company’s backlog is almost entirely defensive, which means limited asset risk compared to RTX.
The chart also shows a violent pullback, with a 10% pop breaking both the 50-day and 200-day moving averages. The Relative Strength Index (RSI) has also crossed above 50 in bullish territory, but the stock is still about 16% below the March high. At 19 times the forward earnings, the LMT is cheaper than the RTX, but the backlog is not separated, and another sudden stoppage of fire could suppress the direction of Lockheed’s Q3.
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