Defense Stocks Poised for Liftoff as Canada Drops $30B Bomb on Military Budget

Lockheed, Northrop, Raytheon shares are about to get the kind of stimulus package even crypto bros would envy—straight from Ottawa's coffers.

Defense contractors lick their lips as Canada's $30B spending spree proves governments still love old-school fiscal artillery more than digital war chests. Guess tanks still trump DeFi when geopolitics get spicy.

Bonus cynicism: Nothing rallies a portfolio like good old-fashioned war economy math—just ask the WWII generation (and their defense stock dividends).

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As a member of the North Atlantic Treaty Organization (NATO), Canada is required to spend 2% of its gross domestic product (GDP) on defense. But until now, Canada has never met that target, spending only 1.45% of its GDP on defense in 2024.

However, Canada’s newly installed Prime Minister Mark Carney is looking to close the gap on Canada’s defense spending, pledging to lift the country’s defense spending to 2% of GDP in the current Fiscal year that runs until March 31, 2026.

The defense spending increase could be a boon to leading defense contractors such as Lockheed Martin (LMT), Northrop Grumman (NOC), and RTX Corp. (RTX).

Closing the Gap

According to government projections, Canada is projected to spend $52.3 billion on defense in the current 2025-26 Fiscal year. Canada’s parliamentary budget office has estimated that the federal government WOULD need to spend $81.9 billion to hit NATO’s 2% GDP target, an increase of $29.6 billion from current levels.

Canada has long been one of the biggest laggards among NATO members when it comes to meeting its defense spending targets, a fact that has drawn the ire of U.S. President Donald Trump. Currently, 22 of 32 member countries meet or exceed NATO’s 2% defense spending target.

Canada is expected to spend the additional defense money on new submarines, military aircraft, and artillery. Part of the new spending plan includes Canada’s participation in the $234 billion “ReArm Europe” initiative, and to expand and bolster the Canadian Coast Guard.

Is LMT Stock a Buy?

The stock of Lockheed Martin has a consensus Moderate Buy rating among 15 Wall Street analysts. That rating is based on seven Buy and eight Hold recommendations assigned in the last three months. The average LMT price target of $521.07 implies 8.37% upside from current levels.