US defense stocks surge as Trump proposes $1.5 trln 2027 budget

Kratos Defense & Security Solutions

08/01/2026 09:54

** Shares of defense companies advance premarket after U.S. President Donald Trump calls for $1.5 trln budget in 2027

** Northrop Grumman NOC.N up 6.8%, Lockheed Martin LMT.N up 6.7%, RTX RTX.N up 5.5%

** Kratos Defense KTOS.O up 6.6%, General Dynamics GD.N up 4.3% in thin volumes

** Disclosure lacks clarity on funding even as Department of Defense seeks total $1 trln budget for 2026, says a group of equity analysts led by Sheila Kahyaoglu at Jefferies

** If increment in budget goes to procurement and R&D, brokerage expects EPS upside of 11% for GD, 13% for NOC, 8% for LMT and 6% for RTX

** Defence companies' shares fell on Wednesday after Trump threatened to halt their dividends, buybacks

** Jefferies expects no share buybacks in 2026-2027 to result in ~5-10% downside to shares of GD, NOC, LMT and RTX, with GD most hit

** S&P 500 Aerospace and Defense subindex .SPLRCAERO logged its biggest annual gain since 2013 last year

 (Reporting by Johann M Cherian in Bengaluru)

 ((johann.mcherian@thomsonreuters.com))