Textron Inc. (TXT): A Top Pick for Military Drone Investing

We recently released a list of the 10 Top Military Drone Stocks to Invest in Today In this piece, we'll examine how Textron Inc. (NYSE:TXT) measures up against some of the top companies in the drone industry.

Contemporary warfare is swiftly transforming beyond just involving soldiers, tanks, and fighter jets. Crowds of unmanned aerial vehicles (UAVs), controlled by artificial intelligence, now dominate the airspace and can hit adversary objectives precisely. This shift in combat has mixed human roles with those of machines, necessitating a reconsideration of what constitutes effective military strength.

READ ALSO: 10 Nations Boasting the Highest Number of Military Drones Worldwide and Goldman Sachs' Recommended Defense Stocks: Leading 12 Choices .

Over the past several years, there has been a significant increase in the demand for drones as various nations utilize Unmanned Aerial Vehicles (UAVs) for gathering intelligence, conducting reconnaissance missions, performing surveillance activities, and executing targeted operations. These airborne systems provide an overhead perspective of combat zones, complicating movement and concealment efforts for those involved in conflicts.

In the 2020 conflict over the Nagorno-Karabakh region involving Azerbaijan and Armenia, drones emerged as a significant element. Throughout various towns and cities during the ongoing Russia-Ukraine war, these unmanned aircraft have filled the sky, prompting defense analysts to recognize them as an emerging challenge in air defense strategies.

For nearly a hundred years, the U.S. has utilized unmanned aerial vehicles (UAVs), initially deploying them during World War II and most recently during conflicts such as those in Afghanistan and Iraq. In 2023, the Department of Defense (DoD) introduced Project Replicator, aimed at producing large numbers of 'attritable autonomous systems' within the coming 18 to 24 months. Additionally, the Air Force is working on drone wingmen designed to accompany their fighter and bomber aircraft through the Collaborative Combat Aircraft (CCA) program. This year, in March, the first two prototypes of these CCA fighters were revealed.

Nonetheless, specialists in military defense see the increasing presence of unmanned aerial vehicles (UAVs) as a significant security risk, particularly since U.S. forces have been facing more attacks from non-government groups in the Middle East. Additionally, officials in Washington are concerned that China might take cues from Russia’s playbook during the Ukraine conflict and initiate comparable assaults on American assets in the Asia-Pacific region.

A significant amount of effort is being directed towards protecting nations from the dangers presented by unmanned aerial vehicles (UAVs). In October 2024, the Department of Defense (DoD) granted a $250 million contract to Anduril Industries for developing systems to thwart drone assaults on U.S. military personnel. As part of this agreement, the country will be supplied with 500 recuperative Roadrunner interceptors—drones designed for reuse that can either neutralize approaching drones or safely return to base if engagement does not occur.

Given that, let’s move on to the lineup of the top drone stocks worth purchasing.

A military transport aircraft touching down at its destination highlights the robustness of its defensive capabilities.

Methodology

We drew samples from ETFs that have investments linked to military drones and also referred back to our earlier pieces on this topic. Our selection encompassed both companies solely focused on manufacturing military drones and larger defense firms involved in drone initiatives. Next, out of these picks, we chose the top 10 stocks which attracted the most hedge fund backers, using data sourced from Insider Monkey’s repository covering more than 1,000 leading hedge funds up until the fourth quarter of 2024.

Why do we focus on the stocks that hedge funds accumulate? It's straightforward: our analysis indicates that mimicking the top choices from leading hedge funds allows us to surpass the broader market performance. Each quarter, our monthly publication recommends 14 small-cap and large-cap equities, achieving returns of 373.4% since May 2014, which significantly exceeds its benchmark by 218 percentage points. see more details here ).

Textron Inc. (NYSE: TXT )

Number of Hedge Fund holders: 29

Textron Inc., listed as TXT on the NYSE, produces goods for customers in various sectors via its six divisions: Bell, Textron Aviation, Textron eAviation, Textron Systems, Industrial, and Finance.

The business stands out as a prominent figure in the market of unmanned aerial, terrestrial, and underwater systems. Currently, they are focused on securing the FTUAS Option 3 and Option 4 awards from the U.S. Army. As part of this agreement with Textron Inc. (NYSE: TXT), the company will conduct flight tests along with MOSA demonstrations and provide the Army with an Aerosonde Mk. 4.8 Hybrid Quad unmanned aircraft system for assessment purposes.

Textron Inc. (NYSE:TXT), which operates under ticker symbol TXT, announced its financial performance for the initial quarter of fiscal year 2025 on April 24th. The corporation saw revenues rise to $3.3 billion, exceeding expectations and marking an increase of $171 million over the previous year. Additionally, their adjusted earnings per share (EPS) reached $1.28, surpassing analyst predictions of $1.16 per share and reflecting growth from the $1.20 recorded during the same period last year. This success can largely be attributed to high demand within the Aviation sector, particularly for military helicopters along with various aftermarket components and support services.

Textron Inc. (NYSE: TXT), which has extensive experience with unmanned surface vehicles (USVs), was recently granted a three-year, $100 million contract from the Naval Sea Systems Command. This deal involves performing payload integration and providing software support for the MCM Unmanned Surface Vehicle (USV). Additionally, Textron will handle testing and demonstrations related to possible upcoming mission systems.

Based on Insider Monkey’s data from Q4 2024, 29 hedge funds included shares of Textron Inc. (NYSE:TXT) in their portfolios, indicating it as one of the top picks among drone-related stocks currently available. Despite having an overall recommendation of Hold from financial experts on Wall Street, these same analysts predict that the stock could see approximately a 31% increase in value over time.

Overall, TXT ranks 7th Among the top 10 military drone stocks to consider right now, we recognize their appeal. However, we place greater confidence in artificial intelligence stocks as they seem poised to offer superior returns over a shorter period. One particular AI stock has seen growth year-to-date despite many prominent AI stocks dropping roughly 25%. Should you seek an AI investment with stronger prospects than TXT yet trading below five times its earnings, explore our detailed analysis on this opportunity. cheapest AI stock .

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Disclosure: None. This piece was initially published at Insider Monkey .