Canada Wants Defence Spending to Become an Export Boom: 3 TSX Stocks I’d Buy

Canada wants defence spending to create exportable industries, and three TSX stocks show how that could happen.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 22, 8:00 pm EDT

Key Points

Canada’s defence strategy aims to build domestic capability and grow exports, not just buy foreign equipment.
Exchange Income can export surveillance and missionized aircraft expertise, while CGI benefits from defence shifting toward software and cybersecurity.
Celestica supplies critical defence electronics and also rides AI infrastructure, but valuation and execution risk are real.

Canada’s defence buildout could become much more than a very expensive shopping trip.

At the Canada Investment Summit, executives repeatedly described an opportunity to turn rising military spending into something Canada can actually sell.

Ottawa’s Defence Industrial Strategy aims to direct more procurement toward Canadian companies, build domestic production, and ultimately increase Canadian defence exports by 50%. Prime Minister Mark Carney told summit investors the broader strategy could catalyse roughly $500 billion of investment over the next decade.

For investors, that opens the door well beyond the aircraft manufacturers everyone already knows.

Map of Canada showing connectivity — Source: Getty Images

EIF

Exchange Income (TSX: EIF) is one of my favourite less-obvious choices. Its PAL Aerospace business designs and modifies aircraft for intelligence, surveillance, and reconnaissance missions. PAL Aerospace recently won work modifying aircraft for Air Greenland’s surveillance operations. It is also participating in Canada’s Future Aircrew Training program, including support for the Royal Canadian Air Force’s CT-142Q aircraft.

The broader company is performing well too. Second-quarter earnings per share (EPS) increased 29%, prompting Exchange Income to raise its 2026 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) guidance to between $890 million and $920 million.

The company also increased its monthly dividend to $0.24 per share. At around $118, EIF trades near 24 times forward earnings. That’s richer than its historical valuation, making price my biggest concern. Still, defence and surveillance provide another growth engine inside an already diversified aviation business.

CGI

The second stock is CGI (TSX: GIB.A). Modern defence isn’t just submarines and fighter jets. It’s cybersecurity, cloud infrastructure, artificial intelligence, electronic warfare, and enormous quantities of secure data. CGI already works across all of them.

More than 500,000 NATO and national defence personnel use its document-management systems. CGI also supports command-and-control systems, electronic warfare, secure communications, and AI projects for NATO organizations.

It recently signed a contract with the NATO Communications and Information Agency for secure mobile communications. That makes CGI particularly interesting as allies spend more on digital defence without necessarily ordering another piece of giant hardware.

Third-quarter revenue reached $4.2 billion, while adjusted EPS increased 9% to $2.29. Backlog sits at an enormous $31.8 billion. Yet shares recently traded around $97, or only about 10 times forward earnings. Growth has been modest, and not all CGI revenue comes from defence. Still, that’s a pretty undemanding valuation for a profitable technology company already embedded inside allied government systems.

CLS

Then there’s Celestica (TSX: CLS). The Toronto-based company manufactures mission-critical electronics used across defence aircraft, ships, land systems, drones, and space equipment. Its products include secure communications, avionics, guidance electronics, radar-related systems, and other components that disappear inside the flashy equipment governments actually announce.

That’s appealing because defence manufacturers need to increase production before they can fill growing order books. Celestica’s total second-quarter revenue surged 62% to US$4.7 billion, while adjusted EPS reached US$2.54. Most of that explosive growth currently comes from AI and data-centre infrastructure rather than defence. That’s also the risk in using CLS as a defence play.

Yet management says aerospace and defence have a strong long-term demand outlook, supported by new programs. Around $465, Celestica trades near 22 times forward earnings after an extraordinary run. It’s the most expensive-looking share price of these three, but also the company sitting between two enormous spending cycles: AI infrastructure and defence electronics.

Bottom line

Canada doesn’t simply want to spend more on defence. It wants Canadian companies selling more of it abroad. Exchange Income supplies surveillance aircraft expertise. CGI supplies digital defence. Celestica supplies the electronics. That’s a much wider investment opportunity than another fighter-jet order.