Why Leonardo (BIT:LDO) Is Up 6.3% After Geopolitical Comments Boost Defense Sector Sentiment

• Earlier this week, oil prices rose and defense sector sentiment strengthened after former President Trump stated Ukraine could potentially regain all of its territory from Russia, driving renewed attention to defense companies including Leonardo.
• This shift in geopolitical outlook has triggered heightened interest in defense technologies as investors weigh the possibility of increased demand for advanced military solutions.
• We will explore how renewed optimism for elevated defense spending, sparked by recent geopolitical comments, could influence Leonardo’s broader investment case.

Find companies with promising cash flow potential yet trading below their fair value.

Leonardo Investment Narrative Recap

If you are considering Leonardo as a shareholder, you need to believe in the resilience of global defense budgets and the company’s ability to capture rising demand for advanced military technology. While recent comments from former President Trump might boost short-term sentiment and reinforce expectations for higher European defense spending, a known growth catalyst, the most significant near-term risk remains the company’s ongoing losses in its Aerostructures division, which continue to weigh on overall profitability. If the impact of geopolitical news proves short-lived, the underlying financial and operational risks may remain the more critical focus for investors.

Of particular interest is Leonardo’s late July teaming agreement with Textron Aviation Defense, targeting the U.S. Navy’s Undergraduate Jet Training System. This move aligns with increased investor attention on military upgrades and order growth following the renewed focus on European and allied defense support, as highlighted this week. Announcements like this could reinforce the company’s broader growth story as long as defense sector catalysts remain robust.

Yet in contrast to the optimistic headlines, investors should be aware of the persistent cash drain in certain divisions, which means…

Read the full narrative on Leonardo (it's free!)

Leonardo's outlook projects €23.1 billion in revenue and €1.5 billion in earnings by 2028. This requires 7.2% annual revenue growth and a €0.5 billion increase in earnings from the current €1.0 billion.

Uncover how Leonardo's forecasts yield a €53.38 fair value, in line with its current price.

Exploring Other Perspectives

Simply Wall St Community members have submitted 13 different fair value opinions for Leonardo, ranging from €38.57 to €102.37 per share. With future European defense spending a major catalyst, the wide gap in projections signals that you should carefully consider multiple points of view when assessing the company’s long-term strength.

Explore 13 other fair value estimates on Leonardo - why the stock might be worth 27% less than the current price!

Build Your Own Leonardo Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Leonardo research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Leonardo research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Leonardo's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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