Leonardo and Fincantieri on the shields, 'outperform' for Intermonte

  (Il Sole 24 Ore Radiocor) - Defence stocks on the shields, driven by the international situation that has become more tense in recent hours, after the squestration by the States of two Venezuelan-linked oil tankers, one of which is flying the Russian flag. In addition, the US president, Donald Trump, announced his intention to demand a more than 50% increase in the US military budget, bringing it to around USD 1.5 trillion in 2027. At the same time, he signed an executive order restricting the distribution of dividends and the launch of buybacks by defence contractors, urging greater reinvestment of resources in production capacity, technology, and industrial programmes. The statements are part of a strategy to structurally strengthen the US military and revitalise the defence industrial base, with a focus on speed of execution, domestic manufacturing capability, and supply chain security.

In this context, in Milan, shares Leonardo ran and updated their all-time high to EUR 60.18, while the Fincantieri also did well. In the rest of Europe, Germany's Rheinmetall and the UK's Bae System are in the lead. France's Thales is at a standstill.

Intermonte analysts explained that the news is positive for Italian defence stocks exposed to the US. Experts, on the other hand, do not expect impacts and changes in the companies' remuneration plans towards shareholders. In particular, "for Fincantieri the news is relevant in the context of the ongoing reconfiguration of US naval forces programmes, after the cancellation of four units of the Constellation programme and the contextual indication of future new orders on platforms more consistent with US operational priorities". In practice, such a marked increase in the budget could accelerate the translation of these indications into concrete contracts, especially in the amphibious, special mission, logistic support and, potentially, ice-class vessel segments'. Thus Intermonte reiterated its 'Outperform' recommendation on the shares, with an indication of a target price of EUR 24, taking into account that the group has an established industrial presence in the United States, with four shipyards and more than 3,700 employees, as well as more than USD 800 million in cumulative investments.

The experts nevertheless expressed an 'Outperform' recommendation also on Leonardo (price target at EUR 63), also due to the direct exposure to the US market through Leonardo Drs, which represents about 18% of the group's capitalisation and operates in segments that will benefit from the growing US budget. Intermonte also recalled the role of Avio (Outperform with price target at €34), which could benefit indirectly along the aerospace and propulsion value chain if the expansion of US spending translates into a structural increase in programmes and volumes.