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Investing.com -- JPMorgan has upgraded Renk to Overweight from Neutral and doubled its December 2026 price target to €70, citing a significantly improved earnings outlook and strong demand momentum in the defense sector.
The upgrade follows Renk’s report of stronger-than-expected first-quarter orders. In turn, JPMorgan analysts revised their estimates, lifting their 2025-2027 earnings per share (EPS) forecasts by 3%, 11%, and 16%, respectively.
Renk shares jumped nearly 7% in European trading Friday.
JPMorgan analysts highlighted that “Renk had a much better Q4 24 and Q1 25 and we are now more comfortable with the company’s operational performance.” This marks a big U-turn from their earlier concerns related to leadership changes and soft quarterly results in mid-2024.
The investment case is underpinned by a robust top-line trajectory and expected margin recovery. JPMorgan forecasts an 18% compound annual growth rate in sales through 2030, driven by strong armored vehicle orders across Europe.
“Given the extremely strong outlook for European defence spending (especially in Germany) and very strong recent orders for armoured vehicles containing Renk’s products, the future looks very bright for Renk," the analysts said.
Renk’s EBITA margin dropped in 2024 due to operational issues in the U.S., but JPMorgan expects a recovery as those challenges are addressed. The Wall Street firm now sees EBITA margins rising to 19.5% by 2027, with net income reaching €226 million.
Valuation multiples reflect growing investor confidence. Renk is now trading at 24.6x 2027 earnings, which JPMorgan sees as justified based on its revised growth, return on capital, and peer re-rating.
Renk reported first-quarter orders that beat analyst expectations on Wednesday, driven by rising European defence spending. The company posted an order intake of €549 million, exceeding analysts’ estimates of €500 million, according to Vara data.
Renk, a key supplier of gearboxes for Leopard 2 tanks, said it anticipates continued robust demand as defence budgets expand across Europe, particularly in Germany.
First-quarter revenue was slightly below forecasts, coming in at €273 million versus a projected €279 million.
The company maintained its full-year and mid-term outlook, supported by a solid order backlog of €5.5 billion.