The ongoing trade war between the U.S. and Canada should drive valuations of defence sector stocks higher in 2025 and beyond. Several countries, including Canada, are now looking at domestic manufacturers to boost the supply of defence systems while increasing defence budgets.
In this article, I have identified two TSX defence stocks you can buy right now and benefit from outsized gains as the trade war heats up. Let’s dive deeper.
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Is this TSX stock a good buy?
Valued at a market cap of $3.37 billion, MDA Space (TSX:MDA) stock has surged 90% since its initial public offering in April 2021.MDA Space delivered impressive financial results for 2024 and provided an optimistic outlook for 2025, forecasting significant revenue growth amid rising global space investment.
The Canadian space technology company reported fourth-quarter (Q4) revenue of $347 million, up 69% year over year, with adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) reaching $71 million, a 68% increase. For 2024, MDA generated $1.1 billion in revenue, up 34%, while adjusted EBITDA expanded 25% to $217 million.
“We secured $2.4 billion in new awards, which included the next phases of Canadarm3, in addition to other strategic awards across the three business areas,” said Chief Executive Officer Mike Greenley during the earnings call.
MDA’s 2025 guidance projects revenue between $1.5 billion and $1.65 billion, representing approximately 45% growth at the midpoint. It anticipates adjusted EBITDA between $290 million and 320 million, a 40% increase, maintaining margins of between 19% and 20%.
Recent wins include a $1.1 billion contract with Globalstar to build over 50 MDA AURORA digital satellites for a next-generation LEO constellation. This marks MDA’s third LEO constellation contract in three years. The company’s $4.4 billion backlog provides strong revenue visibility, and recent awards have pushed it closer to $5 billion.
To support growth, MDA is expanding its Quebec facility by 185,000 square feet, creating what it calls “the world’s largest high-volume manufacture facility in its satellite class,” capable of producing two satellites daily once operational in late 2025.
The global space economy continues to expand, with government space investments reaching $135 billion in 2024, up 10% year over year. MDA stock is priced at 24.9 times forward earnings, which is quite cheap given its growth estimates. Analysts remain bullish and expect the TSX stock to gain over 20% in the next 12 months.
The bull case for the TSX defence stock
Valued at a market cap of $621 million, Magellan Aerospace (TSX:MAL) is a global aerospace manufacturer. In 2024, it reported revenue of $942.4 million, up 7.1% year over year.
In 2024, Magellan Aerospace experienced improved stability following years of turbulence. Despite supply chain delays, labour shortages, and market disruptions—including Boeing’s machinist strike in the latter half of the year—Magellan strengthened its contract portfolio.
The aerospace industry experienced record-breaking aircraft orders in 2024. For instance, Airbus secured 878 aircraft orders (creating an 8,658 aircraft backlog), and Boeing added 569 orders to reach a 6,245 aircraft backlog. These figures bode well for suppliers like Magellan, which provides assemblies and systems to major aircraft manufacturers.
Commercial aviation saw robust growth, with IATA (International Air Transport Association) reporting an 8.6% year-on-year increase in industry-wide travel. International traffic grew 10.6%, while domestic traffic rose 5.5%.
The defence market remains strong, with global defence aircraft production revenue forecast to increase by over 50% from 2023 to 2032, according to AeroDynamic Advisory.
Analysts expect MAL’s sales to increase to $1.01 billion in 2025 and $1.13 billion in 2026. Comparatively, earnings per share are forecast to expand from $0.62 in 2024 to $1.53 in 2026.
