Deutsche Bank has maintained its Buy rating on Leonardo Spa (LDO: IM) (OTC: FINMY) and increased the stock's price target to €27.00 from €26.00.
The firm anticipates Leonardo's third-quarter and nine-month results, which are scheduled for release after the market closes on November 7, with a conference call to follow at 18:30 CET on the same day.
The upcoming financial report is expected to show a robust order intake, although a year-over-year decline is predicted. The third-quarter operational performance is projected to align closely with the same quarter of the previous year at the EBITA level. Additionally, the third quarter of 2024 is estimated to see a cash outflow of €100 million.
Deutsche Bank's detailed forecasts for Leonardo's third-quarter performance include a 15% decrease in order intake, a 12% increase in sales (or 6% excluding the Space sector), and a 1% rise in group EBITA.
The comparison with the third quarter of 2023 is challenging, especially in the Defence Electronics segment, which last year secured a significant contract for the completion of the UK Typhoon radar development.
The absence of large-scale orders in the third quarter of 2024 means that the order intake is expected to be comprised mainly of small- to medium-sized contracts. The predicted value of orders for the quarter stands at €3.9 billion, marking a 15% decrease compared to the same period last year.
In other recent news, Deutsche Bank has reiterated its "Buy" rating on Leonardo Spa's stock, citing an expected strong order intake. This comes with an increased price target on shares, from €25.00 to €26.00.
The firm anticipates Leonardo's first-half results to demonstrate a 21% increase in order intake, a 6% rise in sales, and a 2% decrease in EBIT. Deutsche Bank also projects a year-over-year decrease in Free Operating Cash Flow (FOCF).
These projections are based on the timing of certain projects and the increased valuation of DRS and Hensoldt. Despite a forecasted softer performance in the second quarter compared to the first, Deutsche Bank's key focus remains on order intake.
InvestingPro Insights
To complement Deutsche Bank's analysis of Leonardo Spa (OTC: FINMY), recent data from InvestingPro offers additional perspective on the company's financial position. Leonardo's market capitalization stands at $13.23 billion, reflecting its significant presence in the Aerospace & Defense industry. The company's P/E ratio of 12.08 suggests it may be undervalued relative to its earnings, which aligns with one of the InvestingPro Tips indicating that Leonardo is trading at a low P/E ratio relative to its near-term earnings growth.
Leonardo's revenue growth of 8.99% over the last twelve months and 11.94% in the most recent quarter demonstrates the company's ability to expand its business, even as Deutsche Bank anticipates a challenging comparison for order intake in Q3 2024. The company's profitability is further underscored by its gross profit margin of 39.2% and operating income margin of 7.48%.
InvestingPro Tips also highlight that Leonardo has been a prominent player in its industry and has delivered a strong return over the last five years. This long-term performance, coupled with analysts' predictions of profitability for the current year, may provide context for Deutsche Bank's maintained Buy rating and increased price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Leonardo Spa, providing deeper insights into the company's financial health and market position.
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