Leonardo at the bottom of the Milan stock exchange it lost 6% to 46,69 euros in a European defence sector under pressure with numbers below expectations Rheinmetall (-5% in Frankfurt), while the indices are accelerating. Market sentiment, moderately positive at the start, improved with the Kremlin's confirmation that the meeting between US President Donald Trump and Russian President Vladimir Putin will be held "in the next few days", raising hopes for a possible agreement that puts an end to the war in Ukraine, a hypothesis that brings some pressure on defense stocks after the rally (Leonardo has risen by 82% since the beginning of the year).
EU Defense Under Pressure: Rheinmetall and Leonardo on the Stock Exchange
But what weighs most heavily on the sector are the disappointing numbers of the German Rheinmetall (with which Leonardo is in joint venture for land military vehicles). In the half-yearly report presented to the market, the German group underlined that the increase in revenues is mainly linked to the demand for armaments from the defence sector which "remains high" due to the war in Ukraine, the major German investment plan and the increased spending commitment from NATO countries.
However, the market has focused on lower-than-expected second-quarter numbers, with revenues 4% lower than consensus. The group confirmed its guidance and emphasized that it expects strong incoming orders from Germany in the fourth quarter.
Rheinmetall's Stock Market Drops: Analysts' Opinion
According to investment houses, these very results were rather weak and lower than expected (-4% revenues compared to consensus), even if, they observe Jefferies, the group has however given confirmations.
Secondo Morgan Stanley, Rheinmetall has adopted a conservative position in deciding not to revise its 2025 estimates upwards despite the performance of its results, but this was because it is waiting to incorporate the orders resulting from the increase in military spending globally and in Germany in particular. The outlook is the main driver of Rheinmetall shares, according to Berenberg, and this explains the negative stock market performance (-4%) when the numbers were announced, but despite the weak second quarter, the long-term prospects remain solid.
