Defense Spending Surge Drives Growth for RTX and Honeywell Aerospace
The global military spending continues to rise, reaching $2.9 trillion last year and accounting for roughly 2.5% of the world's economic output. The U.S. government is no exception, with its defense budget totaling a staggering $1.5 trillion in fiscal 2027, a 42% increase over 2026.
Two companies that stand to benefit from this increased spending are Honeywell Aerospace and RTX (RTX +0.42%). RTX has a significant backlog of $289 billion, which is expected to surge to $460 billion by the end of 2028, making it a prime beneficiary of an expected U.S. military replenishment cycle.
The company's Tomahawk missile production was accelerated this summer after the U.S. spent nearly $23 billion to entice RTX to speed up production. The Tomahawk missile is a critical component in the war against Iran, and the U.S. has used up a significant amount of its ordinance.
Honeywell Aerospace, which recently separated from Honeywell Technologies (HON +0.36%), has struggled since its spin-off but may be undervalued at 45.1% below its 52-week high on Sept. 23. The company is looking to grab a larger slice of the defense spending pie by allocating $500 million to enhance its domestic facilities and attract more business from the Department of Defense.