While the market has been spinning its wheels in 2026, a handful of defense and aerospace names have been quietly doing the opposite. The S&P 500 is down about 0.82% year-to-date, and yet the three companies below have either outpaced it significantly or are sitting on a compelling setup most investors haven’t fully priced in. These aren’t the Lockheeds and Raytheons on every defense watchlist. These are the quieter names doing serious work.
Ranked by EPS execution quality, revenue growth trajectory, backlog strength, free cash flow generation, and forward guidance credibility. Counting down from #3 to #1.
#3: Booz Allen Hamilton
Booz Allen Hamilton (NYSE:BAH) sits at the intersection of national security consulting, AI, and cyber, advising the U.S. government on its most sensitive missions.
The most recent quarter delivered a headline that looks almost absurd on the surface: EPS came in at $1.77 versus a consensus estimate of $1.27, a 39% beat. But peel it back and a $0.50 per share tax benefit from new Section 174 rules did most of the heavy lifting. The underlying business is under real pressure.
Revenue came in at $2.62 billion, missing estimates by 3.86% and declining 10.2% year-over-year. The Civil segment bore the brunt, falling to $732 million from $1.01 billion in the prior year, largely due to a government shutdown that cost the company approximately $50 million in unperformed work. Headcount dropped to 31,600 from 35,900 a year ago.
CEO Horacio Rozanski kept a steady tone: “Booz Allen’s leading technology is aligned with the nation’s highest priorities. I am confident we are on track to accelerate our growth and deepen our impact on America’s security and prosperity.”
The bull case rests on a record Q3 backlog of $38 billion, a 7% dividend increase to $0.59 per share, and a new partnership with Andreessen Horowitz as its first-ever Technology Acceleration Partner for Governments, backed by a $400 million capital commitment. The stock trades at just 11x trailing earnings, well below its historical range, making it interesting if the Civil segment stabilizes. But with shares down 29% over the past year, the market is clearly skeptical recovery is imminent.
#2: Honeywell International
Honeywell International (NASDAQ:HON) is in the middle of one of the more interesting corporate transformations in industrial history. The company is splitting its aerospace and automation businesses into two separate entities, with the separation expected to complete in Q3 2026. That alone is a catalyst worth watching.
The Aerospace Technologies segment is the engine here. Q4 revenue came in at $4.52 billion with 13% reported growth and 21% organic growth. Defense and Space contributed $1.975 billion while orders grew 23% organically, driving a record backlog of over $37 billion.
CEO Vimal Kapur put it directly: “We concluded 2025 with strong results that exceeded the high end of our guidance for adjusted sales and adjusted EPS. Orders grew 23% stemming from robust demand in the Aerospace Technologies and Energy and Sustainability Solutions segments…we exited 2025 with a record backlog of over $37 billion which positions us well for 2026.”
The GAAP numbers look ugly, with net income down 77.67% in Q4 due to a $373 million Flexjet litigation charge plus goodwill impairments. Strip those out and the adjusted story is much cleaner. Free cash flow for the full year hit $5.1 billion, up 3.43%, and 2026 adjusted EPS guidance of $10.35 to $10.65 implies 6% to 9% growth. Shares are up 23% year-to-date, already outpacing the flat market by a wide margin.
#1: Teledyne Technologies
Teledyne Technologies (NYSE:TDY) builds precision instruments, defense electronics, infrared imaging systems, and underwater vehicles. It’s not flashy. It just executes.
Q4 2025 was the best quarter in company history by multiple measures. Non-GAAP EPS came in at $6.30 versus a $5.00 estimate, a 26% beat. Revenue grew 7.3% year-over-year to $1.61 billion. The Aerospace and Defense Electronics segment surged 40.4%, its fourth consecutive quarter of accelerating growth.
CEO Robert Mehrabian: “We concluded 2025 with the best quarterly orders, sales, and non-GAAP earnings and operating margin in the company’s history. In the fourth quarter, we were awarded our first production-rate contract in the loitering munition market, and we were selected to supply space-based infrared detectors to the majority of prime contractors on the newly awarded U.S. Space Development Agency Tranche 3 Tracking Layer program.”
Free cash flow exceeded $1 billion for the second consecutive year. The company deployed approximately $850 million in acquisitions in 2025 and repurchased $400 million in shares during Q4 alone. 2026 non-GAAP EPS guidance of $23.45 to $23.85 implies continued double-digit earnings growth. Shares are up 28% year-to-date, and analysts carry a consensus target of $699.62 with 10 buy or strong buy ratings versus just 3 holds.
The Bottom Line
All three companies are doing serious work in defense and aerospace at very different speeds. Booz Allen is fighting through government headwinds with a cheap valuation and a massive backlog as its lifeline. Honeywell is in transformation mode, with a record aerospace backlog and a clean-break separation that could unlock real value. Teledyne is simply executing at a level most companies never reach, posting record results quarter after quarter while staying almost entirely off the mainstream radar. In a year where the S&P 500 is barely treading water, Teledyne’s 28% gain tells the story better than any analyst note could.
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