Leonardo Raising estimates and PT; still one of our top picks in European Defence

Research evidence excerpt

J P M O R G A N

Europe Equity Research

05 August 2026

Leonardo

Raising estimates and PT; still one of our top picks in

European Defence

Overweight

LDOF.MI, LDO IM

Price (05 Aug 26):€57.4

▲Price Target (Dec-27):€73.0

Prior (Dec-27):€70.0

Following another earnings beat in LDO’s Q2 2026 results (Table 1), we raise our

2026-30E EPS by 3-4% pa (Table 2). LDO remains one of our top picks in

European Defence and we continue to see scope for further EPS upgrades from: (1)

ongoing self-help; (2) potentially higher defence spending in the US and M.East

(c30% combined of group revenue); (3) potential corporate activity (in

Aerostructures and Space). On valuation, it screens as very attractive relative to its

large-cap European Defence peers (Table 4). We increase our SOTP-based Dec-27

PT by 4% to €73 which results in an implied upside of 27% over the next 17 months.

Increasing our estimates following another earnings beat: LDO’s Q2 26

results LDO beat company-compiled consensus EBITA by 5%. LDO increased

its 2026 guidance for EBITA to €2.21bn (prev. €2.15bn), and FCF to €1.37bn

(prev. €1.32bn). This was LDO’s third earnings upgrade this year (we note that

two of the upgrades have been organic and one was due to the consolidation of

Iveco Defence Vehicles). We increase our 2026-30E EPS by an average of 3%

primarily due to higher margin forecasts in the Defence Electronics and

Security (DES) division and the Aeronautics division (Table 2).

First thoughts of the new CEO: Lorenzo Mariani became CEO of LDO in

May 2026 having previously served as Managing Director of MBDA Italy. The

Q2 call was his first results call as CEO. During the call he stated that he intends

to stick to the Industrial Plan (IP) that was introduced under the previous CEO

but stressed the need to accelerate many of its initiatives (eg. better execution,

accelerated programme development). We welcomed these remarks.

Industrial Plan - we scope for higher cost savings: We think it is likely that

LDO will provide an update of its multi-year Industrial Plan (IP) early next

year. When the IP target of €590m run-rate cost savings in 2028 was initially

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