SAAB B: Future Defense Backlog And Execution Risks Will Shape Returns Ahead

Analysts have nudged their price target on Saab higher by SEK 30 to SEK 460, citing slightly improved long term earnings visibility and a modestly higher valuation multiple.

Analyst Commentary

Analyst reactions to the updated target reflect a nuanced view of Saab's risk reward profile, balancing improved long term earnings visibility against lingering concerns on valuation and execution.

Bullish Takeaways

• Bullish analysts highlight that the raised target price acknowledges a clearer multi year earnings trajectory, supported by a solid backlog and improving program visibility.
• They see upside potential from continued defense spending tailwinds, which could support mid term growth above prior expectations and justify a moderately higher valuation multiple.
• Supporters point to Saab's disciplined capital allocation and cost control as drivers of incremental margin expansion, underpinning confidence in execution on current guidance.
• The higher target is viewed as a signal that downside risk to earnings estimates has eased, narrowing the gap between current trading levels and long term intrinsic value.

Bearish Takeaways

• Bearish analysts maintain that, despite the upward revision, the stock still screens as fully valued relative to peers on earnings and cash flow metrics.
• They remain cautious on execution risks tied to large, complex defense programs, noting that schedule slippage or cost inflation could pressure margins over time.
• There is concern that a significant portion of the growth story is already reflected in the share price, limiting near term rerating potential even with improved earnings visibility.
• Some analysts flag geopolitical and budgetary uncertainty as ongoing risks to order intake, which could challenge Saab's ability to sustain the growth embedded in the new target.

What's in the News

• Secured a EUR 3.1 billion contract with the Colombian Government for 17 Gripen E/F fighter aircraft, including extensive industrial cooperation and technology transfer projects spanning aeronautics, cyber security, health, sustainable energy and water purification (Key Developments)
• Received multiple major air defence orders, including approximately SEK 2.1 billion for Swedish brigade ground-based air defence sensors and C2 systems and SEK 1.4 billion for a third MSHORAD battery for Lithuania, reinforcing its position in short range air defence (Key Developments)
• Upgraded 2025 guidance to 20 to 24 percent organic sales growth, with EBIT expected to grow faster than sales and operational cash flow to remain positive, indicating stronger medium term earnings momentum (Key Developments)
• Signed significant electronic warfare and weapons contracts, including approximately EUR 549 million for Arexis EW suites on German Eurofighters and around SEK 1 billion for new launch systems for Gripen C/D and E (Key Developments)
• Expanded strategic partnerships, notably a Memorandum of Understanding with Ericsson Canada and Calian on secure C3 communications systems in Canada and advanced conceptual studies and support contracts for future fighter systems and Gripen fleets with the Swedish Armed Forces (Key Developments)

Valuation Changes

• Fair Value has risen slightly, increasing from SEK 481.0 to approximately SEK 490.4 per share.
• Discount Rate has edged higher, moving from about 5.65 percent to roughly 5.68 percent, implying a marginally higher required return.
• Revenue Growth assumptions are effectively unchanged, remaining around 17.46 percent.
• Net Profit Margin expectations are stable, holding at roughly 8.10 percent.
• Future P/E has risen slightly, from about 32.4x to approximately 33.1x, indicating a modestly higher earnings multiple in the valuation model.