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On Thursday, Deutsche Bank (ETR:DBKGn)’s research division announced an increase in the price target for Leonardo Spa shares, raising it to €46.00 from the previous target of €36.00. The firm continues to endorse a Buy rating on the stock. The optimism appears well-founded, as InvestingPro data shows Leonardo has delivered impressive returns of over 111% in the past six months, with a favorable PEG ratio of 0.25 indicating attractive growth potential relative to its current valuation.
The price target revision follows Leonardo’s recent disclosure of its industrial plan update. According to Deutsche Bank analysts, while the delay in announcing a solution for the Aerostructures division was a letdown, the clarity provided regarding capital allocation and the aircraft revenue program was reassuring to investors. The company’s financial health score of "GOOD" from InvestingPro and revenue growth of ~13.5% support this positive outlook.
The report from Deutsche Bank highlighted that the updated industrial plan does not yet account for potential increases in defense spending from European countries. This expectation of additional defense expenditures is a key factor in maintaining the Buy rating for Leonardo Spa. As a prominent player in the Aerospace & Defense industry, Leonardo’s strong market position is reflected in its robust financial metrics. However, InvestingPro analysis suggests the stock may be approaching overbought territory, with 12 additional ProTips available for subscribers.
The analysts noted, "Leonardo disclosed its industrial plan update. The deferred announcement of a solution for Aerostructures was a disappointment, but the relative transparency on capital allocation and the aircraft revenue program were comforting." They added that there is more to anticipate from the company, stating, "More importantly, the industrial plan update does not reflect the extra Defence spend European states may commit to. More is thus still to come, hence our Buy rating maintained."
Despite the positive outlook, the analysts also acknowledged that the valuation assumptions for Leonardo Spa have become more demanding. "We have revised our TP from €36 to €46, reflecting however that valuation assumptions are now stretched," the Deutsche Bank report concluded. This suggests that while the firm sees upside potential for Leonardo Spa, it also recognizes the increased expectations embedded in the stock’s valuation.
In other recent news, Jefferies has initiated coverage on Leonardo Spa with a Buy rating, setting a price target of EUR52.00. This move underscores a positive outlook on Leonardo Spa’s future performance and growth potential. The company is currently at a strategic juncture, planning to divest its aerostructures business, which has previously affected its earnings. This divestment is expected to enhance its financial performance. Additionally, Leonardo Spa is poised to benefit from a new joint venture in land defense with Rheinmetall (ETR:RHMG) and potential consolidation in the European space sector. Jefferies notes that Leonardo Spa’s mid-term targets project around 7% annual growth by 2029, although the company may achieve these goals a year earlier. The firm’s performance in 2024 has already matched the targets set for 2025, highlighting the company’s progress. These developments reflect confidence in Leonardo Spa’s strategic initiatives and its ability to exceed financial targets.
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