With inflation, interest rates and energy prices all pulling at markets, many investors are looking for themes that are closely linked to real-world policy and government spending. Aerospace and defense stocks sit at the crossroads of national security, trade and long-term procurement cycles, which can sometimes make them less sensitive to short-term sentiment swings. This Aerospace And Defense screener focuses on companies that manufacture or provide services to the sector, helping you narrow a broad universe into a targeted watchlist. Below, the article highlights three stocks from the screener that many investors are watching closely right now.

Rheinmetall (XTRA:RHM)

Overview: Rheinmetall is a German defense group that builds armored vehicles, weapons, ammunition and electronic systems for armed forces, combining traditional hardware such as combat and logistics vehicles with radar, air defense, cyber and training solutions for customers worldwide.

Operations: Rheinmetall generates most of its revenue from Vehicle Systems at about €5.0b and Weapon and Ammunition at about €3.5b, with Germany and other European countries together contributing the bulk of its sales.

Market Cap: €49.0b

Rheinmetall operates at the center of rising European defense spending, with a large order pipeline in armored vehicles, ammunition and higher margin electronic systems. Some valuation models and analyst targets point to potential upside, reflecting confidence in its record order book and joint projects with partners such as Lockheed Martin. At the same time, heavy reliance on European government contracts, exposure to export controls such as recent Chinese measures, and funding that leans on external borrowing mean execution and policy setbacks could quickly change the picture, which is one reason many investors follow Rheinmetall closely.

Rheinmetall’s surging order pipeline and expanding European footprint can look straightforward, yet the real story often sits in the fine print of contracts, balance sheet commitments and future funding needs that show up in the Rheinmetall financial health report

Thales (ENXTPA:HO)

Overview: Thales is a French technology and defense company that supplies air defense systems, avionics, cybersecurity tools, satellites and digital identity solutions for governments, infrastructure operators and enterprises worldwide.

Operations: Thales generates most of its revenue from Defence at about €13.3b, followed by Aerospace at about €6.1b and Cyber & Digital at about €3.9b, with smaller segment adjustments recorded in Other.

Market Cap: €50.0b

Thales stands out for investors because it sits at the intersection of rising European defense budgets, growing demand for cybersecurity and secure digital identity, and a broad aerospace and space portfolio. Earnings have recently grown faster than the wider Aerospace & Defense sector, margins have improved, and recent contracts such as Romania’s GM200 radar order underline its position in European air and missile defense. At the same time, the company is dealing with one off charges, integration challenges in Cyber & Digital, and heavy exposure to government spending and restructuring in Space. Anyone weighing Thales will want to balance these strengths against execution risks and funding structure, and then compare that picture with the current valuation and analyst expectations.

Thales appears to be at an inflection point where defense, cybersecurity and space are converging. The key question is whether the current price already reflects that story or not, which is exactly what the DCF valuation analysis for Thales

RTX (RTX)

Overview: RTX Corporation is a large US aerospace and defense company that supplies aircraft engines, avionics, cabin systems and aftermarket services through Collins Aerospace and Pratt & Whitney, alongside Raytheon missile, radar and sensor systems for government and commercial customers worldwide.

Operations: RTX generates most of its revenue from Pratt & Whitney at about US$35.0b, Collins Aerospace at about US$31.2b and Raytheon at about US$29.9b, with a smaller offsetting amount in Eliminations and Other.

Market Cap: US$286.8b

RTX catches attention because it mixes a US$236b plus backlog, a strong Q2 beat, and raised guidance with improving profit margins and steady earnings growth, supported by both commercial aerospace demand and large defense programs. At the same time, jet engine reliability issues, high debt, tariff exposure, and dependence on US and allied defense budgets mean execution missteps or policy shifts could quickly affect that outlook. Analysts have recently lifted price targets after the Q2 results and record US$289b backlog. Yet the stock still trades close to some fair value estimates, which is why many investors are watching how RTX balances growth, capital allocation, and these risks from here.

RTX’s raised guidance, large backlog and margin improvement story looks strong, but the real tension is whether the current price already bakes it all in. The analyst forecasts for RTX starts to unpack this before a crucial risk twist

The three stocks in this article are only a starting point, and the full screener has surfaced more than 300 additional Aerospace and Defense companies with equally compelling narratives inside the Aerospace And Defense screener. Use Simply Wall St to analyze and filter those companies by the exact catalysts and themes that matter to you, so you can identify your highest conviction ideas with more focus and less noise.

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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.