Barclays initiates European defence, says budget expansion possible but not immune to risks

Hensoldt AG

09/09/2025 08:58

** Barclays says European defence budget expansion into the 2030s is possible but not immune to risks

** "All countries (excluding Spain) have communicated plans to allocate 3.5% of their GDP to "core defence" by 2035 and we believe the sheer size of the numbers is too big to ignore," the broker notes

** Barclays stresses the high visibility, double-digit revenue growth, margin improvement, and strong cash flow for European defence companies

** Barclays says it sees the German budget as the most credible of all and selects Germany's Rheinmetall RHMG.DE (overweight) as most preferred one on German exposure, short-cycle portfolio and market share gains

** Sweden's Saab SAABb.ST, being the least preferred, is initiated at "underweight" as the broker sees it as "detached from fundamentals" and notes that lower exposure to fast-growing European defence budgets could weigh on future performance

** Barclays also initiates Italy's Leonardo LDOF.MI and Germany's Hensoldt HAGG.DE on "equal-weight"

** Saab down about 4.5% in the early trade, while Hensoldt is down about 3%

 (Reporting by Elviira Luoma)

 ((Elviira.luoma@thomsonreuters.com))