Defense Stocks To Watch As Rising Military Spending Reshapes Contractor Backlogs

The turmoil around Ukraine’s military leadership is rippling far beyond politics, influencing expectations around defense budgets, supply chains and risk pricing across global markets. For investors, this kind of geopolitical stress can reshape which defense and aerospace stocks look better positioned and which might face headwinds, without changing the core thesis of the sector overnight. This article focuses on three stocks from a Defense and Aerospace Sector screener that appear closely exposed to the latest news, and examines how these developments could affect each stock’s risk and opportunity profile.

Tutor Perini (TPC)

Overview: Tutor Perini is a large US construction contractor that builds complex civil infrastructure such as highways, bridges, tunnels, transit systems and military facilities, as well as major buildings including hospitals, hotels, offices and sports venues. The company is supported by in house specialty services for electrical, mechanical, plumbing and HVAC work.

Operations: Tutor Perini generates most of its revenue from Civil projects at about US$3.2b, followed by Building at about US$2.0b and Specialty Contractors at about US$0.9b, with the vast majority of revenue coming from the United States at about US$5.2b.

Market Cap: US$4.2b

Investors looking at Tutor Perini in the context of rising NATO and allied defense spending are seeing a construction specialist with a record US$21.1b backlog tied to large federal, transit and defense projects, including a recent US$651.8m Guam naval contract that points to its role in Indo Pacific hardening. At the same time, the stock carries execution and legal risks, ranging from mega project complexity to fresh court rulings that add tens of millions of dollars in damages on legacy disputes, and it relies heavily on external borrowing even after refinancing expensive debt. The market currently prices Tutor Perini on a rich P/E multiple, and investors are left to weigh whether backlog strength and federal exposure justify those risks.

Tutor Perini’s record US$21.1b backlog and Guam naval work suggest a story that could be bigger than a headline P/E multiple implies, but the real tension sits in the 4 key rewards and 1 important warning sign

Aecon Group (TSX:ARE)

Overview: Aecon Group is a Canadian construction and infrastructure company that builds and operates large scale projects such as transit lines, roads, nuclear and power facilities, utilities and industrial infrastructure for governments and private clients in Canada, the US and abroad.

Operations: Aecon Group generates virtually all of its revenue from Construction at about CA$5.6b, with a much smaller contribution from Concessions at about CA$8.3m and other items at about CA$4.0m.

Market Cap: CA$3.6b

Aecon Group gives you exposure to long term infrastructure themes, including energy transition, nuclear refurbishment and major transportation projects. The company reports a record backlog supported by contracts such as the Greenlight Electricity Centre and Roberts Bank Terminal 2. At the same time, the stock carries real tensions, including reliance on government and utility spending, high use of external borrowing, recent insider selling and earnings that are still shaped by one off gains and project losses, including a recent quarterly net loss of CA$17.9m. For investors trying to balance this mix of growth potential and execution risk, a key consideration is whether the quality of future contracts and recurring utilities income can steadily reshape Aecon’s earnings profile.

Aecon’s record backlog and nuclear and energy contracts could be masking a very different earnings profile ahead, and the real question is what the 2 key rewards and 2 important warning signs reveals about where that story breaks next

Austal (ASX:ASB)

Overview: Austal is an Australian shipbuilder that designs, builds and supports advanced naval vessels, patrol boats and high speed ferries for defense and commercial customers across the United States, Australia and other global markets, while also supplying ship control, monitoring and motion control systems.

Operations: Austal generates most of its revenue from the USA, with about A$1.25b from USA Shipbuilding and A$303.9m from USA Support, alongside A$344.3m from Australasia Shipbuilding and A$210.6m from Australasia Support, partly offset by A$3.6m of eliminations and adjustments.

Market Cap: A$1.4b

Austal gives you a focused exposure to naval shipbuilding and support at a time when maritime security and NATO aligned demand are in sharp focus, and the Ukraine leadership crisis is keeping defense spending front of mind for many governments. The company combines a large order book, exposure to Indo Pacific defense priorities and growing higher margin support work. It currently trades at a P/E below both its domestic and global Aerospace & Defense peer averages. At the same time, investors need to weigh heavy reliance on government contracts, earnings volatility, board turnover and high use of external borrowing. The key consideration is how that mix of contracts, margins and balance sheet risk compares when you look more closely at the business.

Austal’s shipbuilding story is tied to Indo Pacific priorities and support margins, but the real question is how that mix stacks up when you scan the 4 key rewards and 1 important major warning sign

The three defense and aerospace stocks discussed here are only a starting point. The full Defense and Aerospace Sector screener highlights 40 more companies that carry equally compelling stories around contracts, balance sheets and geopolitical exposure. If you want to identify the highest conviction ideas in this space, use Simply Wall St to filter and analyze by the specific catalysts, financial health metrics and risk factors that matter most to your thesis.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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