Better Drone Stock: Kratos Defense vs. Northrop Grumman

AeroVironment (AVAV) rose 6% to $153.93 after securing a $464.8M U.S. Army contract for laser weapon systems. Unusual Machines (UMAC) and Red Cat (RCAT) also gained, up 1% and 3% respectively, on sector sentiment. The award is the first production contract for directed energy in U.S. history, according to AeroVironment.

Northrop Grumman (NOC) reports growing international demand for its defense platforms, including orders from Kuwait, NATO, and Australia. RTX (RTX) also sees strong international demand for its defense systems, securing over $10B in awards in 2026. NOC shares have declined 1% in a month, trading at a 1.68x forward P/S ratio, below the industry average of 2.47x.

The Pentagon signed agreements with Lockheed Martin and General Dynamics to boost production of THAAD and Patriot missiles. Lockheed will quadruple THAAD production to 400/year and triple PAC-3 MSE to 2,000/year. The moves aim to address missile shortages and enhance U.S. defense capabilities, with $67.1B requested to prevent shortfalls.

Northrop Grumman (NYSE:NOC) received an $86.1M contract extension from the U.S. Department of War for remote visual assessment program support. The contract, FA8214-26-F-B017, is under a 2021 agreement and includes services like program management and maintenance. Work will occur at four U.S. Air Force bases, with completion expected by September 2031. Fiscal 2026 funds of $15.2M are obligated. The Air Force Nuclear Weapons Center is the contracting activity.

The Pentagon announced $2.2B in contracts with General Dynamics and Lockheed Martin to boost production of Patriot and THAAD interceptor missiles. The seven-year agreements aim to triple Patriot and quadruple THAAD component production. According to CSIS, U.S. stockpiles of these interceptors have significantly decreased due to conflicts in Iran and Ukraine. The Pentagon noted that funding is subject to annual appropriations.

U.S.-Iran tensions have increased demand for defense products, benefiting contractors like Lockheed Martin (LMT), RTX Corp. (RTX), and Northrop Grumman (NOC). Defense ETFs such as iShares U.S. Aerospace & Defense ETF (ITA), Invesco Aerospace & Defense ETF (PPA), and State Street SPDR S&P Aerospace & Defense ETF (XAR) offer diversified exposure to the sector. Global defense spending is projected to reach $2.6 trillion by 2026.