3 Aerospace & Defense Stocks to Invest in Amid Rising Yields

The 10-year Treasury yield reached 5.23% and the 30-year yield hit 5.55%, pressuring rate-sensitive equities, but the article argues aerospace and defense may remain resilient due to multi-year government contracts and rising global military budgets. Zacks highlights Bombardier, Airbus and Embraer as Buy-rated names: current-year earnings growth expectations are 31.5%, 10.7% and 121.7%, respectively, while consensus estimates have risen 23%, 1% and 8.1% over 60 days. The sector’s relative appeal is tied to elevated inflation, prospective Fed tightening and geopolitical tensions supporting defense procurement.

Analysis

The relevant distinction is not “defense” versus the market, but government-funded backlog versus commercially financed aircraft demand. AIR and EMBJ retain meaningful exposure to airline capital expenditure, while BBD.A is tied to business-jet demand that can weaken if financing costs, asset-price volatility, or corporate travel budgets deteriorate. Higher long-end rates also raise discount-rate pressure on long-duration aerospace cash flows, so contractual revenue visibility does not automatically prevent multiple compression.

EMBJ has the cleanest near-term earnings-revision momentum, but its upside depends on execution in commercial deliveries and service mix rather than defense alone. AIR is more exposed to aircraft-financing conditions, supplier bottlenecks, and airline balance sheets; a sustained rise in yields can reduce the value of delivery slots even if nominal backlog remains high. BBD.A’s apparent resilience should be treated cautiously: its OTC liquidity and business-aviation cyclicality make it a poor vehicle for a broad defense-spending thesis.

Contrarian view: the article’s defense framing overstates the purity of all three names. If geopolitical risk escalates into actual procurement acceleration, prime contractors and defense-electronics suppliers such as NOC, LMT, GD, LHX, and LDOS should capture a larger and faster share of incremental budgets than commercial-airframe manufacturers. Over the next 1-3 months, watch order cancellations/deferrals, delivery guidance, and the 10-year Treasury yield; a sustained move above 5.25% combined with weaker airline yields would falsify the aerospace-resilience premise. Over 6-18 months, the key catalyst is funded procurement conversion rather than headline defense-budget growth.

Key Decisions for Investors

• Prefer a relative-value defense expression: long ITA or NOC/LMT basket versus short AIR in equal dollar amounts for 3-6 months. This isolates a potential shift from commercial aerospace exposure toward direct procurement beneficiaries; exit if AIR raises free-cash-flow guidance while defense-book-to-bill fails to improve.
• Maintain EMBJ on a watch-to-buy basis rather than chase the revision move. Initiate only following confirmation that delivery and margin guidance are maintained at the next results, with a 6-12 month horizon; the thesis is invalidated by order deferrals, deteriorating working capital, or a material Brazilian-real-driven margin reset.
• Avoid using BBD.A as the primary higher-rates/defense hedge. For investors already long, trim if long-end yields remain above 5% for a full quarter or if business-jet order activity weakens, as the downside from a corporate-capex slowdown is likely more important than incremental defense optionality.
• Do not allocate to QBTS from this theme. There is no demonstrated procurement, aerospace, or rate-sensitivity linkage in the supplied evidence; treat any defense-quantum narrative as an event-driven watch item pending disclosed contract awards and funded revenue.