FINMY - Leonardo DRS: Thesis Intact Maintain Neutral

2024-03-07 13:29:57 ET

Summary

• Leonardo DRS has an ambitious target for 2024.
• The company's order backlog reached a record $7.8 billion, with $3.5 billion in new orders for 2023.
• We believe that DRS sales growth and margin acceleration are already priced in. Our neutral rating is confirmed.

Following our update on Leonardo DRS's mother company ( A Higher EU Defense Budget Means An Overweight ), with a supportive buy rating, we are back to comment on its most valuable US subsidiary. Looking back, we suggest that our readers should: 1) overweight Leonardo ( FINMF ) and 2) remain neutral on Leonardo DRS ( DRS ). This was a good decision, as we might see in the stock price performance below; the Italian mother company (blue line) significantly outperformed DRS's stock price appreciation (red line). That said, investing in Leonardo DRS was not a wrong decision. Since our last update ( Q2 results ), the company has delivered a 40% plus stock price performance....

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