These defense and aerospace stocks may reap the benefits of the hypersonic-missile race

By James Rogers

Defense company Kratos and subcontractors Rocket Labs and Leidos are involved in a $1.45 billion, 5-year U.S. government contract for testing hypersonic missiles

Hypersonic weapons have been in the spotlight in recent years following Russia's use of the high-speed missiles in its war against Ukraine. China has also built up a hypersonic arsenal.

As the U.S. ramps up its efforts around hypersonic weapons, a number of defense and aerospace companies and their stocks are poised to reap the benefits, analysts say.

That was evident this week when Kratos Defense & Security Solutions Inc. (KTOS) clinched the largest award in the company's history with a five-year, $1.45 billion government contract for hypersonic testing. The contract was awarded as part of the U.S. government's Multi-Service Advanced Capability Hypersonic Test Bed (MACH-TB) 2.0 program, which supports the Defense Department's development of hypersonic weapons.

Related: These are the space stocks to watch in 2025

In a note released Monday, analyst firm Benchmark raised its Kratos price target to $38 from $33, with analyst Josh Sullivan citing the impact of the new hypersonic-missiles contract.

"In late December, we raised our outlook for KTOS as we believed the company's core strategy across commercial model affordability of high-end in demand products (drones, engines, rockets, space) positioned the company well for the current environment/incoming Trump administration/M&A target," he wrote. "That thesis is playing out faster than we expected with this award and, as a result, we have raised our expectations, yet again."

The analyst highlighted, in particular, Kratos' Zeus rocket motors, which have already been used in the government's hypersonic testing. "KTOS is well ahead of the curve as far as the increasing interest the DoD has in commercial models, having internally invested in Zeus rocket motors ahead of this award," Sullivan wrote. "Then just last quarter, KTOS announced the site for a Hypersonic System Integration facility which will support dozens of hypersonic builds."

Related: Rocket Lab stock skyrockets on milestone launch weekend

Kratos shares are up 9.7% in 2025, outpacing the S&P 500 index's SPX gain of 0.6%.

In a statement, Kratos said it will lead a team of subcontractors providing support in systems engineering, assembly, testing, mission planning and execution, and launch services. Subcontractors include space-launch-company Rocket Lab USA Inc. (RKLB) and defense contractor and government IT provider Leidos Holdings Inc. (LDOS).

In a statement released late Tuesday, Rocket Lab said it will continue to provide its HASTE (Hypersonic Accelerator Suborbital Test Electron) rocket for the MACH-TB program. MACH-TB 2.0 will provide "an affordable bridge" between hypersonic ground tests and system-level flight tests, the company said. System-level flight tests provide data on the performance of weapons systems.

Related: Rocket Lab stock soars amid strong momentum for the space-launch company's Electron rocket

HASTE is a suborbital version of Rocket Labs' Electron rocket. The company's shares are up 7.4% in 2025 after climbing 360.6% in 2024.

"We are encouraged by this latest announcement, where RKLB has already serviced the MACH-TB program in the past, delivering multiple hypersonic test launches through the company's HASTE rocket, and is a good indicator for future opportunities for HASTE missions, derisking the manifest for Electron as this rocket program continues to scale," Stifel analyst Erik Rasmussen wrote in a note released Wednesday. Stifel raised its Rocket Lab price target to $31 from $26.

Shares of Leidos, which successfully completed a MACH-TB commercial launch vehicle test last month, are up 1.3% in 2025.

-James Rogers

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