European Defense: Into Q2‘26 - Long Leonardo, Thales, Rheinmetall

Research evidence excerpt

European Defense: Into Q2‘26 - Long Leonardo, Thales, Rheinmetall

8 July 2026

Global Aerospace & Defense

European Defense: Into Q2'26 - Long Leonardo, Thales,

Rheinmetall

European Defense stocks are decoupling after a period of broad performance. Ahead of Adrien Rabier

+44 20 7676 6820 Q2’26, we favor self-help stories (Leonardo, Thales) and superior growth (Rheinmetall).

adrien.rabier@bernsteinsg.com

Leonardo (30 July). We expect another beat-and-raise. We are +5% above consensus on

Douglas S. Harned, Ph.D. EBITA and expect FCF to improve too. Growth should be broad-based. We would not be

+1 917 344 8430 surprised to see the 2026 guidance upgraded across all metrics (except FCF). In a more

douglas.harned@bernsteinsg.com

challenging environment for European defense stocks, Leonardo stands out as a self-help

Cyriaque Blanchet story with room for earnings upgrades and re-rating, if execution continues. The stock

+44 20 7676 7342 trades on 11x EBITDA (vs. 14x for the sector). The correction that followed the surprise

cyriaque.blanchet@bernsteinsg.com CEO change is an opportunity, in our view, as the strategy should be unchanged.

Specialist Sales Thales (23 July). We expect a solid Q2'26 print, driven by momentum in the core A&D

James Brady businesses. We are +6% above consensus on A&D, but -6% below on Cyber & Digital.

+44 20 7762 5272 We expect our tactical upgrade to materialize in Q2’26, as we believe Cyber will return to

james.brady@bernsteinsg.com growth and is no longer material enough to drive downgrades (8% of sales, easy comps and

lower expectations).

Rheinmetall (6 August). Q2'26 is the key ST catalyst for Rheinmetall. We expect the

company to meet its implied +60% topline target. If it does, we see scope for the stock to

regain some losses.