October 2026 M&A Insider Report

Defense primes reported strong third-quarter results in October as munitions and rearmament demand continued to build. Lockheed Martin posted sales of $20.7B, up 11%, and a record backlog of $292B, raising its full-year guidance for the second straight quarter and sending its stock up 9% on October 22. RTX raised its 2026 revenue outlook to $97.0B–$97.5B on a record $340B backlog, while Northrop Grumman lifted its 2026 EPS guidance to $29.35–$29.75. Despite the results, defense equities sold off for much of the month as investors priced in a Democratic sweep of the November midterms, with the iShares U.S. Aerospace & Defense ETF (ITA) closing nearly 18% below its August high on October 19.

Defense priorities head into a lame-duck session largely unresolved. The Pentagon continues to operate under a continuing resolution that expires December 11, and FY2027 defense appropriations have not been enacted. The House passed its version of the FY2027 NDAA (H.R. 8800) 216-212 in July, but the Senate bill failed a 50-46 cloture vote and the chamber has yet to pass an NDAA; staff-level talks are underway with a goal of finishing by Thanksgiving. The administration's $1.5T FY2027 request is split between $1.15T in base appropriations and $350B through party-line reconciliation, alongside roughly $60B in supplemental funding for Iran war-related costs, all of which face Democratic opposition.

The Federal Open Market Committee held the federal funds rate at a target range of 3.75% to 4.00% at its October 27–28 meeting in a 10-2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of a quarter-point hike. Chair Kevin Warsh declined to offer forward guidance, and futures markets ended the meeting pricing roughly an 85% probability of a rate hike in December. Defense Primes led the DGI indices over the trailing twelve months, though all three trailed the S&P 500, with third-quarter beats and raised guidance from Lockheed Martin, RTX and Northrop Grumman supporting the primes late in the month.

In October, the U.S. EPA announced two Water Infrastructure Finance and Innovation Act loans totaling $381M. Columbia, Tennessee received $272M to expand drinking water capacity to meet population and economic growth, while the Honolulu Board of Water Supply received $109M to build a reverse osmosis seawater desalination plant producing 1.7M gallons per day. Since its first loan in 2018, the program has announced roughly $24B in financing, with about $11B still available to water systems and another $3B to state infrastructure financing authorities.

The Association of Metropolitan Water Agencies, the National Association of Clean Water Agencies, and the National Utility Contractors Association urged Congress to reauthorize the Clean Water and Drinking Water State Revolving Funds and the Water Infrastructure Finance and Innovation Act program, whose authorization lapsed on September 30. The lapse ends $43.4B in supplemental funding from the 2021 Infrastructure Investment and Jobs Act, and analysts project federal water funding could fall about 60% in FY 2027. The groups want Congress to act by year-end, including $260M for the loan program.