Leonardo slows down with European Defence and Jefferies' rating cut

(Il Sole 24 Ore Radiocor) - The glimmers of peace in Iran are holding back defence stocks and it is the Leonardo that is suffering at the expense of the situation at Piazza Affari. The stock is the worst on Milan's main list, also slowed by Jefferies' rating cut.

Analysts, in a note on the aerospace and defence sector, have in fact lowered their recommendation on the stock from 'Buy' to 'Hold' with a target price limited to EUR 62 (from the previous EUR 68), in light of a 'more difficult context'.

In recent years, thanks to the conflicts in Ukraine and the Middle East, Leonardo, in fact, in the wake of the defence sector, has been the protagonist of a flight to Piazza Affari. In the last three years it has posted a gain of almost 700% on the stock market and last year alone it gained over 88%. In the last month (-5% in the last 30 days), however, the company has had to reckon with market perplexity over thereplacement of Roberto Cingolani with Lorenzo Mariani at the helm of the group, although analysts see the appointment as a sign of continuity.

In addition, the general scenario, according to Jefferies analyst Chloe Lemarie, could be less favourable. For the expert, land defence - a significant, but not dominant business share for Leonardo - is the sub-sector with the greatest potential for development. On the air defence front, 'central to the Iran conflict', however, Jefferies' favourite stocks are now Rheinmetall and Csg, the top choices in the sector.

Among other stocks, the UK's Bae Systems, according to Lemarie, is unlikely to see 'its prospects substantially improved, given its overall limited exposure to US missiles'. Signs of weakness are also emerging from Airbus deliveries, which is also suffering from 'a stream of negative news on air traffic demand'. In contrast, the analyst is positive on Mtu Aero and appreciates the self-help potential of Rolls-Royce.