LMT, NOC, RTX: Canada to Boost Defense Spending by $30 Billion

Canada’s federal government in Ottawa says it will boost its defense spending by $30 billion to meet its obligations under the NATO military alliance.

As a member of the North Atlantic Treaty Organization (NATO), Canada is required to spend 2% of its gross domestic product (GDP) on defense. But until now, Canada has never met that target, spending only 1.45% of its GDP on defense in 2024.

However, Canada’s newly installed Prime Minister Mark Carney is looking to close the gap, pledging to lift the country’s defense spending to 2% of GDP in the current Fiscal year that runs until March 31, 2026. The defense spending increase could be a boon to leading defense contractors such as Lockheed Martin (LMT), Northrop Grumman (NOC), and RTX Corp. (RTX).

Closing the Gap

According to government projections, Canada is projected to spend $52.3 billion on defense in the current 2025-26 Fiscal year. Canada’s parliamentary budget office has estimated that the federal government would need to spend $81.9 billion to hit NATO’s 2% GDP target, an increase of $29.6 billion from current levels.

Canada has long been one of the biggest laggards among NATO members when it comes to meeting its defense spending targets, a fact that has drawn the ire of U.S. President Donald Trump. Currently, 22 of 32 member countries meet or exceed NATO’s 2% defense spending target.

Canada is expected to spend the additional defense money on new submarines, military aircraft, and artillery. Part of the new spending will also include Canada’s participation in the $234 billion “ReArm Europe” initiative, and to expand and bolster the Canadian Coast Guard.

Is LMT Stock a Buy?

The stock of Lockheed Martin has a consensus Moderate Buy rating among 15 Wall Street analysts. That rating is based on seven Buy and eight Hold recommendations assigned in the last three months. The average LMT price target of $521.07 implies 8.37% upside from current levels.

Read more analyst ratings on LMT stock