National Presto Industries: A Hidden Gem in the Expanding U.S. Defense and Security Industrial Base

The U.S. defense and security industrial base is undergoing a transformation of historic proportions. With the FY2026 defense budget requesting $1.01 trillion-a 13.4% increase over FY2025 levels-and the One Big Beautiful Bill Act (OBBBA) projected to push spending above $1 trillion by FY2026, the sector is poised for sustained growth. This expansion is not merely a response to geopolitical tensions but a strategic recalibration driven by the Department of Defense's National Defense Industrial Strategy (NDIS) and the Office of Strategic Capital (OSC). These initiatives prioritize supply chain resilience, industrial modernization, and critical technology development, creating fertile ground for companies like National Presto Industries.

A Defense Sector on the Rise

The FY2026 budget allocates $25 billion to missile defense systems and $60 billion to nuclear modernization, reflecting a broader focus on readiness and innovation. Meanwhile, the OSC's FY2025 Investment Strategy emphasizes credit-based financial tools to de-risk private investments in microelectronics, battery storage, and synthetic biology. These efforts are part of a $23 billion industrial base modernization plan spanning FY2025–FY2029, underscoring the federal government's commitment to fortifying domestic production capacity.

The economic implications are equally compelling. Defense spending is projected to grow from $2.75 trillion in 2026 to $4.26 trillion by 2035 at a 5% compound annual growth rate. This trajectory is fueled by modernization programs, long-term procurement cycles, and rising global tensions. For investors, the sector's resilience-bolstered by its role in national security-offers a compelling contrast to more cyclical industries.

National Presto's Strategic Positioning

National Presto Industries, a mid-cap manufacturer with a dual focus on defense and consumer goods, has emerged as a standout beneficiary of this momentum. In 2024, the company reported consolidated net sales of $388.2 million, a 13.9% year-over-year increase, with its Defense segment contributing $284.025 million-a 17.5% rise. This growth is underpinned by a $1.42 billion backlog as of late 2025, ensuring a steady pipeline of revenue.

Recent contract wins further solidify its position. In December 2025, National Presto secured a $92.3 million subcontract from Boeing for warhead production under the Small Diameter Bomb program, with deliveries expected by late 2026. Additionally, its subsidiary AMTEC Corporation received a $168.1 million option under a five-year 40mm systems contract, bringing the total value of that agreement to $965 million. These contracts, coupled with a $139.3 million order for 40mm M918E2 TP-DNT cartridges, highlight the company's ability to scale production in high-demand areas.

Capital Allocation and Innovation

National Presto's strategic capital allocation reflects its alignment with the NDIS's priorities. The company has prioritized R&D in advanced ammunition development and safety technologies, critical for maintaining a competitive edge in a sector increasingly focused on innovation. While its return on capital employed (ROCE) of 9.7% for the trailing twelve months ending September 2024 lags behind its five-year performance, this metric is less indicative of future potential than the strength of its backlog and contract pipeline.

The company's 2024–2025 growth strategy emphasizes leveraging its defense backlog and expanding its Housewares/Small Appliance division. This dual focus mitigates risk by diversifying revenue streams while allowing the defense segment to capitalize on long-term secular trends. With deliveries under the 40mm systems contract extending through early 2030, National Presto is well-positioned to benefit from multi-year procurement cycles.

A Compelling Investment Thesis

For investors, National Presto represents a rare combination of defensive qualities and growth potential. Its defense segment's 17.5% year-over-year sales growth mirrors the broader sector's expansion, while its strategic alignment with the NDIS and OSC initiatives ensures access to capital and policy tailwinds. The company's ability to secure high-value, long-term contracts-such as the $965 million 40mm systems agreement-demonstrates its credibility as a reliable supplier in a sector where trust and reliability are paramount.

Moreover, National Presto's capital allocation strategy balances maturity with innovation. While its ROCE suggests a mature business, its R&D investments and contract wins indicate a forward-looking approach. As the U.S. defense sector transitions from procurement to modernization, companies that can adapt their production capabilities to emerging technologies-such as hypersonics and advanced munitions-will outperform. National Presto's recent focus on advanced ammunition development positions it to capitalize on this shift.

Conclusion

The U.S. defense industrial base is entering a golden age of investment and innovation. For companies like National Presto Industries, this environment offers a unique opportunity to scale operations, diversify revenue streams, and secure long-term profitability. With a robust backlog, a track record of winning high-value contracts, and a strategic focus on R&D and production expansion, National Presto is not merely a beneficiary of the sector's growth-it is a driver of it. For investors seeking exposure to the defense sector's momentum without the volatility of pure-play defense stocks, National Presto represents a compelling, underappreciated opportunity.