These are the best aerospace and defense stocks to own in 2026: KeyBanc

Investing.com -- KeyBanc Capital Markets has initiated coverage across a group of space and defense technology companies, naming several as its preferred aerospace and defense stocks to own into 2026 as spending priorities tilt toward advanced warfare, missile defense, and space-based systems.

The broker’s top picks are centered on companies with direct exposure to high-growth defense technology programs and the ability to scale alongside rising government budgets.

AeroVironment stands out as one of KeyBanc’s highest-conviction ideas. Analyst Michael Leshock highlights the company’s “industry-leading margins” and deep relationships with the U.S. Department of Defense.

This is supported by a growing backlog and the integration of BlueHalo, which expands its reach into counter-UAS, space, cyber, and electronic warfare.

“AVAV’s ability to ramp and/or shift production to high-demand product lines is a key competitive differentiator, in our view,” Lechock said in a report.

“We believe AVAV’s premium valuation is appropriate and reflective of a high-quality, established defense tech leader; a strong macro backdrop, and idiosyncratic growth drivers/platforms,” he added.

Kratos Defense & Security Solutions is another top pick, with Leshock pointing to its first-to-market strategy and leverage to Golden Dome, hypersonics, and the Collaborative Combat Aircraft program.

The analyst describes Kratos as a “prime beneficiary of the global push for the modernization of military programs,” noting its track record of delivering advanced platforms faster and at lower cost than legacy competitors.

“KTOS shares trade near the higher end of its historical valuation range, which we believe is appropriate given the structural shift to high-tech defense platforms, its proven track record, and the myriad of programs under development that offer meaningful upside optionality,” he wrote.

KeyBanc also favors Karman Holdings, citing its exposure to missiles, rockets, drones, and space programs, as well as its role as an advantaged supplier amid defense and space reshoring efforts.

Leshock points to a combination of secular growth drivers and company-specific opportunities that support its positive stance.

Lastly, Intuitive Machines rounds out the list of preferred names. Leshock highlights the company’s position as a front-runner in NASA’s lunar terrain vehicle (LTV) contract.

Furthermore, the company’s recent acquisition of Lanteris “represents another transformational catalyst for the company to add in-house satellite manufacturing at scale and expand into high-growth data services and defense applications," he added.

This sets up Intuitive Machines to scale and brings its pro-forma total backlog to nearly $1 billion.