Rebuilding U.S. Missile Inventory: A Multiyear Project

The investable signal is not “more defense spending,” but a multi-year re-phasing of who gets paid first. Near-term, prime contractors with already-industrialized lines and the ability to prioritize U.S. orders should see the cleanest revenue visibility; the bigger second-order winner is the vendor ecosystem tied to propellant, seekers, guidance electronics, castings, and test equipment, where bottlenecks can force pricing power even before headline unit volumes inflect. That favors firms with less program concentration and more exposure to throughput expansion rather than just new awards.

The core risk is a sequencing problem: inventory replenishment for the U.S. and allies competes with operational demand, so deliveries can be politically redirected, creating lumpier revenue recognition and working-capital swings. That means the market may underappreciate execution risk over the next 2-8 quarters even if the headline budget is large. The fastest upside is in names where capacity is already constrained but funded, because every incremental tooling upgrade or supplier qualification can re-rate 2027-2029 earnings power.

Contrarianly, the consensus may be overestimating the speed at which budget authority becomes earnings. The binding constraint is not demand, but industrial ramp: if labor, energetics, or cast-component supply chains remain tight, the margin mix can deteriorate even as backlog grows. Another underappreciated angle is substitution risk: if the Pentagon leans on lower-cost alternatives or reorders priorities away from certain interceptors, some of the apparent inventory urgency becomes a timing issue rather than a structural demand step-up.