Leonardo: 346 million contract with the Vienna army
Agreement for the supply of 18 AW169M helicopters with the option for an additional 18. Fitch raises the outlook to stable from negative: “A return to a solid financial profile expected”. The stock accelerates on the stock market (+ 3.2%), up by 16% in one month. The expectations of analysts on the 2021 accounts.
The first AW169M LUH will be delivered later this year.
Leonardo accelerates in the stock market by marking this morning a rise of 3.2% to 6.85 euros which makes the performance bubbly since the beginning of the year, with a gain that exceeds 8%. In the last month, the progress was 16%.
The flow of good news, the latest, released on Thursday 13 January, concerns the signing of a 346 million euro contract for the supply of helicopters has contributed to this result. AW169M LUH (Light Utility Helicopter) intended for the Austrian army. The program provides for the delivery of 18 helicopters from the Leonardo plant in Vergiate (Varese) – six in the ‘B’ training version, in the advanced multirole ‘MA’ version with the integration of the related mission systems and weapon systems – as well as one complete and dedicated support and training package.
The first AW169M LUH will be delivered before the end of the year and deliveries will be completed by 2026. The contract also includes options for an additional 18 helicopters.
Fitch: good business profile with strong positioning in some markets.
A few days earlier, on 11 January, the rating agency Fitch had announced the revision of Leonardo’s outlook (opinion on future prospects), raised from negative to stable. The long-term financial strength rating is confirmed BBB-. Fitch underlines that the rating reflects the expectations of a return to a solid profile in the short and medium term and also the good business profile of the company, characterized by a strong positioning in the helicopter markets and in some defense electronics markets.
Meanwhile, Leonardo Spa is working on the relaunch of the Aerostructures division with a new investment plan of 300 million euros and is concentrating on expanding the production base of the Grottaglie (Taranto) site, currently the most impacted by the consequences of the pandemic on civil aviation . The novelty is that Grottaglie deals with the solar-powered drone.
The “Sole 24 Ore” writes it specifying that it will be the first program that could dare to diversify the production of the plant which, from its start in 2006 to today, has worked only on the sections of the carbon fiber fuselage of the Boeing (NYSE: ) 787. To reduce the single client, the industrial activity of the solar-powered drone prototypes could be started already this year in Grottaglie.
Alliance with Skydweller to build the solar-powered transport drone.
In recent days in Grottaglie there was the second visit, in the last three months, by the top management of Skydweller, the American startup engaged in the development of the first solar-powered drone capable of carrying a high payload, with persistence in flight almost unlimited, based on the Solar Impulse 2 aircraft that went around the world in 2016.
In addition to being a technological partner, Leonardo has recently invested in Skydweller Aero by acquiring a shareholding.
Improving operating margin. Target price average of € 8.7.
Leonardo will announce on March 10 the results of the fourth quarter and of the full year 2021. For the whole year, the consensus of analysts foresees a turnover up by 5.2% to 14.1 billion euros and a Ebitda at 1.5 billion (+ 7.1%), with an improvement in the operating margin to 7.7% from 6.99% in 2020. The margin is expected to further improve to 8.3% in 2022.
As for the profit, 2021 should close with a net result of 487 million, doubled compared to the 241 million of the previous year. In 2022, analysts expect a profit of 629 million.
Out of 16 analysts who want the stock, 11 recommend buying Leonardo shares and only one recommends selling. The average target price is € 8.7 (35% upside).