Last Update 26 Aug 26
Fair value Decreased 11%ESLT: Europe Expansion And Record Backlog Will Support Future Upside
Elbit Systems' analyst price targets have been reset lower, with recent cuts ranging from about ₪845 to ₪960 as analysts factor in sector wide revaluation, slightly softer revenue growth assumptions, firmer profit margins and a reduced future P/E outlook.
Analyst Commentary
Recent research on Elbit Systems reflects a mix of optimism about growth opportunities and caution around valuation and execution risks. Analysts have reset targets lower, but the underlying views on demand, backlog and end market support remain varied.
Bullish Takeaways
- Bullish analysts point to Elbit Systems' increased R&D and capex spending as a way to respond to demand signals and support execution on its backlog, which they see as important for future revenue visibility.
- Some see the potential upside from an incremental US$14.7b Israel defense budget add on as supportive for areas where Elbit Systems is active, including munitions, interceptors, sensors, C4ISR, UAVs, electro optics and survivability systems.
- There is a positive read through from adjacent defense and robotics coverage, where Elbit Systems appears as a partner in AI driven autonomy and multi domain systems, which analysts view as a long term growth theme.
- Management's aim to double European revenue by 2030, with a higher implied growth rate than for the wider company to 2028, is seen by some investors as an ambitious but clear target for regional expansion.
Bearish Takeaways
- Multiple firms have cut Elbit Systems' price targets, with new levels clustered around US$845 to US$960, as bearish analysts adjust for revaluation across defense tech peers and a reduced future P/E outlook.
- Neutral and Hold ratings, including from JPMorgan and others, signal that some analysts see current valuation as fair relative to execution and growth expectations rather than clearly attractive.
- Comments about sector volatility and the need for greater selectivity highlight concerns that defense stocks, including Elbit Systems, may be more sensitive to shifts in sentiment and peer multiples.
- While management targets stronger European growth, bearish analysts flag the execution risk around hitting these long term goals, which could pressure the stock if progress falls short of expectations.
What’s in the News for Elbit Systems
- Elbit Systems reported record Q2 2026 results with revenues of US$2.29b and Non-GAAP earnings per share of US$4.14, and an order backlog of US$32b, according to recent company announcements and analyst coverage.
- The company declared a dividend of US$1.00 per share, stated as payable on October 26, 2026, alongside its Q2 2026 report. Source attribution points to multiple news outlets covering the announcement.
- Elbit Systems unveiled progress in high power laser and directed energy technologies, including an airborne high power laser system under development for helicopters and fighter aircraft, as reported in recent news stories.
- Serbia and Elbit Systems plan to open a joint UAV factory in September as part of a five year defense contract valued at US$1.63b, with Elbit holding a 51% stake and Serbia's SDPR holding 49%, according to international media reports.
- Elbit Systems announced a contract of about US$350m from an international customer to upgrade Main Battle Tanks over four years, including AI enabled electro optical sights and advanced communication systems, based on recent client announcement summaries.
Valuation Changes for Elbit Systems
- Fair Value has been reset lower, moving from ₪3,324.07 to ₪2,965.32, which is a reduction of about 10.8%.
- Discount Rate has edged down slightly from 9.71% to 9.59%, indicating only a modest change in required return assumptions.
- Revenue Growth expectations have softened, shifting from 12.22% to 11.50%, which is a reduction of around 0.72 percentage points in the modeled rate.
- Net Profit Margin has been marked slightly higher, moving from 8.72% to 9.02%, a change of about 0.30 percentage points in projected profitability.
- Future P/E has been reset from 71.09x to 58.96x, which is a sizeable cut of roughly 17.1% in the valuation multiple applied to Elbit Systems.
Catalysts
About Elbit Systems
Elbit Systems is a global defense technology company that develops, integrates and delivers advanced systems across land, air, sea, space and cyber domains.
What are the underlying business or industry changes driving this perspective?
- Record $25.2 billion backlog, with close to 70 percent from customers outside Israel and multi year contracts such as the 8 year, 2.3 billion dollar strategic program, provides high visibility on sustained top line growth and supports operating leverage and earnings compounding.
- Structural rise in defense budgets, particularly in Europe where new facilities in Sweden and Germany expand local presence, is driving large orders for artillery rockets, loitering munitions and ISTAR suites, underpinning multi year revenue growth and scale driven margin expansion.
- Rapid adoption of unmanned systems and integrated sensor solutions, evidenced by over 20 Hermes 900 customers and cross selling of payloads and EW systems, should increase system content per platform and lift both revenue and gross margins over time.
- Commercialization of directed energy and other advanced energy weapons, including IRON BEAM and airborne high power laser programs, positions Elbit at the forefront of a new interception paradigm that can shift the mix toward higher value, higher margin solutions and stronger long term earnings growth.
- Company wide operational excellence, including a unified ERP, AI driven process optimization and automation in ammunition and munition plants, is already visible in the 1.5 percentage point operating margin improvement and should continue to enhance net margins and free cash flow conversion as volumes grow.
Assumptions
How have these above catalysts been quantified?
- Analysts are assuming Elbit Systems's revenue will grow by 11.5% annually over the next 3 years.
- Analysts assume that profit margins will increase from 7.4% today to 9.0% in 3 years time.
- Analysts expect earnings to reach $1.1 billion (and earnings per share of $21.2) by about August 2029, up from $636.0 million today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 59.0x on those 2029 earnings, up from 53.0x today. This future PE is greater than the current PE for the US Aerospace & Defense industry at 19.1x.
- Analysts expect the number of shares outstanding to grow by 0.9% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 9.59%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?
- A normalization of global defense budgets after the current upcycle, particularly in Europe and Israel where Elbit is seeing outsized demand, could slow order intake and erode the visibility provided by the $25.2 billion backlog, putting long-term revenue growth and earnings compounding at risk.
- Aerospace and Elbit Systems of America already showed low single digit revenue declines in the quarter, and if U.S. defense spending remains limited to single digit growth or shifts priorities away from Elbit’s avionics and precision guided munitions, these structurally important segments could drag on consolidated revenue growth and net margins.
- The investment in high power lasers, directed energy weapons and other advanced energy systems may not translate into broad adoption outside Israel if competing technologies or regulatory constraints win out, which would leave Elbit with elevated R&D and CapEx burdens that dilute operating margins and depress future earnings.
- Elbit is benefiting from war driven demand for ammunition, munitions and loitering systems, but a durable ceasefire and de escalation in key regions could compress this structurally elevated demand, driving down high growth Land segment revenues and reversing some of the recent scale driven operating margin expansion.
- The current step change in profitability is tied to mix, AI enabled operational efficiencies and large multiyear contracts, and any execution missteps, cost overruns or delays on programs like the 8 year, USD 2.3 billion strategic solution could erode backlog profitability, reducing gross margin resilience and weakening cash flow and net income over time.
Valuation
How have all the factors above been brought together to estimate a fair value?
- The analysts have a consensus price target of ₪2965.32 for Elbit Systems based on their expectations of its future earnings growth, profit margins and other risk factors.
- In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $11.8 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 59.0x, assuming you use a discount rate of 9.6%.
- Given the current share price of ₪2138.8, the analyst price target of ₪2965.32 is 27.9% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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