Fox Business Sep 20, 2026
With Sheila Kahyaoglu, Managing Director and Senior Equities Research Analyst at Jefferies
The administration is asking for a $1.5 trillion defense budget. Sheila Kahyaoglu's downside case is a base budget of about $1.1 trillion, and the $350 billion of reconciliation money in between is what decides which defense stocks get hit.
Almost every input a defense investor looks at is pointing up. Orders are accelerating, capacity is tight, deals are being done, and the stocks are still going down.
"Yeah, on the defense side, what's making the stock struggle is just the election, the mid-terms, the CR, lack of budget until December 10, so defense is not working for that reason. We don't have clarity."
Sheila Kahyaoglu, Managing Director and senior equities research analyst at Jefferies, on Fox Business, covers 60 aerospace, airline and defense names and spends part of the job inside the factories that build them. She came on air having just got off a plane, which is how host Charles Payne introduced her.
The full segment is covered here so you can skip it.
Here are the 6 calls that matter.
Key Takeaways
Defense is not working on demand, it is waiting for a budget that does not arrive until December 10
The election, the midterms and the stopgap funding measure are all in the way
If the reconciliation money does not come through, the base budget lands in the 1.1 trillion range against the 1.5 trillion being asked for
Raytheon has outperformed the other five primes, and she likes it because 60% of the business is commercial aerospace rather than defense
The cheapest stock of the 60 she covers trades at eight times EBITDA, and is starting a business selling temporary power
GE Vernova's turbines are booked out to 2030 and 2040, so the buyers have to go somewhere
Voyager has raised guidance since Jefferies took it public and just won work from Raytheon
Private defense tech is not holding the public story back, because the money entering the sector is growing on both sides
1. Kick the Tires
Payne opened by splitting Wall Street analysts into the ones who work the phone from the office and the ones who also visit plants and conferences, and put Kahyaoglu in the second group.
She said the visits tell her what is actually being built, at a moment when new defense technology companies are appearing, SpaceX is moving into the sector and the artificial intelligence trade is running through it.
The point of the factory visit is to see who can produce and who cannot
So we really like to see production facilities and what's going on, who's ramping — is a company like Honeywell Aerospace, down 30% in the last month, because they can't produce enough
Sheila Kahyaoglu
2. No Budget Until Dec 10
Payne put her own research back to her. Her notes list mergers and acquisitions, capacity, improving demand sentiment and accelerating defense orders, and yet the stocks are struggling.
Her answer was that none of that is the problem. The problem is that Congress has not passed a defense budget, and is funding the government instead through a continuing resolution, the stopgap measure that holds spending at the prior year's level until a real bill passes.
The stocks are stuck on politics, not on orders
Yeah, on the defense side, what's making the stock struggle is just the election, the mid-terms, the CR, lack of budget until December 10, so defense is not working for that reason. We don't have clarity.
Sheila Kahyaoglu
Payne asked what the minimum would be if the administration could not get the $1.5 trillion it wants, and argued that nobody would object to a defense increase after Iran, Russia, Ukraine and what China did this week. He added his own reading of Xi Jinping, that it feels like the Chinese leader wants to do something before he dies.
Kahyaoglu said investors are split on whether this is a severe upcycle in defense spending and whether that spending is about to peak. Then she gave the arithmetic underneath the split.
The base budget could come in at 1.1 trillion, and the gap to 1.5 is reconciliation money
Some folks think — some investors are mixed and think we're in the midst of a severe defense upcycle and defense spending will peak. We don't have the availability to make the funds, and we could get a base budget that looks in the 1.1 trillion range, so who's going to get hit if we don't have 350 billion of that reconciliation funding to get us to that 1.5 — what stocks could get hit.
Sheila Kahyaoglu
3. Why She Likes Raytheon
Payne called Raytheon a beautiful chart and a play you cannot avoid. Kahyaoglu started her answer by conceding the valuation.
She owns the expensive end of the group and says so
Yeah, I like expensive things, if you can't tell, but I'd say Raytheon has outperformed the other five primes — Northrop, Lockheed — and we upgraded General Dynamics in June, and I like the way the chart looks.
Sheila Kahyaoglu
What Kahyaoglu thinks about Raytheon turns on the split inside the company. Most of the revenue is not defense at all, which is why the name works while the defense budget is unresolved, and the defense part is weighted toward the missiles everyone expects to keep being bought.
Sixty percent of Raytheon is commercial aerospace, and the defense part is mostly missiles
I think it benefits from commercial aerospace, which represents 60% of the business, and defense represents 40, and you get outsized mix to missile spending, which I think everybody will agree will continue.
Sheila Kahyaoglu
4. Cheapest of 60 Names
Payne asked whether commercial aerospace is still as hot as it was, since every plane he boards feels like it needs replacing. Kahyaoglu said it is, and moved to the cheapest thing in her coverage. She did not name the company on air.
One name trades at eight times EBITDA, the lowest multiple in her coverage
So, the stock covers 60 names trading at eight times EBITDA. It's the cheapest stock of the 60 names I cover, and I cover some airlines, more speculative names, and it's super interesting to me at these levels
Sheila Kahyaoglu
The company does two things. It sells aerospace products and retrofits engines when the cycle calls for it, and it has just started a business renting out temporary electricity generation. Her argument for the second one is a supply argument: the turbine makers are sold out, so buyers who want power sooner have to find it somewhere else.
The new power business is a quarter of next year's earnings power
It's going to generate about 450 million, or 25% of their earnings power, next year, and will provide temporary power when GE Vernova says they are booked through 2030 to 2040 — guess who, Amazon or SpaceX, is going to go to.
Sheila Kahyaoglu
5. Voyager's Share Gain
Payne raised SpaceX stock holding up after its first selling window, then named the space company Kahyaoglu likes: Voyager.
Jefferies took it public, and the guidance has gone up since
I really like Voyager. It's one of the names we've taken public, and since we've taken them public, they have raised their guidance. Their guidance is for 25% top-line growth on an organic basis. They are getting almost triple digits this year, so really good growth.
Sheila Kahyaoglu
The rest of her case is program-level. Voyager has solid fundamentals on missile programs, she said, and has just taken a piece of business from a competitor.
The new Raytheon work is a share gain, not a new order
And they just won a piece of business with Raytheon that is a market share gain for them.
Sheila Kahyaoglu
6. Private Defense Tech
Payne's last question was whether the private companies making noise in defense are holding the public story back, with investors waiting rather than buying.
Kahyaoglu said no. Defense technology is the same industry with technology moving into it, and she said investor attention is rising globally because new capability shows up in her sector first.
More money is coming in on both sides of the public and private line
So whether private or public, there's more funds to go around. You just have to pick the winner that are developing products with capabilities that could be advanced in a quick cycle, and you could produce them in a low-cost manner, but they aren't commoditized as well
Sheila Kahyaoglu
Bonus Insights
The host's read on China
Payne supplied his own reason for expecting a defense increase, listing Iran, Russia, Ukraine and China, and said it feels as though Xi Jinping wants to act before he dies. That framing was Payne's, not Kahyaoglu's, and she did not take it up.
Honeywell is the example of a production problem, not a demand problem
The one stock she named as falling is down on its own ability to build, in her telling, rather than on orders. It is the clearest version of the point the whole segment rests on: in aerospace and defense right now, the constraint is supply and politics rather than customers.
Jefferies is on both sides of the Voyager trade
She recommends Voyager and her firm took it public. She said so on air, which is the disclosure a listener needs to weigh the recommendation.
Kahyaoglu's bottom line is that the orders are there and the budget is not, so the defense primes stay stuck until December 10, and the money in the meantime is in the parts of aerospace that do not depend on a congressional number: commercial aircraft, missile programs and the electricity a sold-out turbine market cannot supply.
Products, Companies & Tools Mentioned
Jefferies (Her firm. She covers 60 aerospace, airline and defense names and took Voyager public)
Honeywell Aerospace (The name she gave as down 30% in the last month, on her account because it cannot produce enough)
Raytheon (The prime she likes. It has outperformed the other five, 60% of the business is commercial aerospace, and the defense side is weighted to missiles)
Northrop Grumman, Lockheed Martin and General Dynamics (The other primes she named. Jefferies upgraded General Dynamics in June)
Voyager (The space name she likes: taken public by Jefferies, guidance raised to 25% organic top-line growth, and a new piece of Raytheon work she calls a share gain)
GE Vernova (Her reason the temporary power business works: its turbines are booked through 2030 to 2040)
SpaceX and Amazon (Named as the kind of buyer that needs power and capability faster than the incumbent suppliers can deliver it)
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