European Defense Stocks For Investors Watching Supply Chain Shifts

Europe’s decision to let Ukraine tap EU defense funds for Chinese drone parts has put a spotlight on how fragile and concentrated global defense supply chains can be. For investors, that raises fresh questions about which stocks might benefit if governments and contractors look for alternatives to Chinese technology, and which could be left behind. This article looks at how that news connects to our Defense Technology and Aerospace Sector screener and walks through 3 stocks that appear positively exposed to these developments, helping you decide whether they deserve a closer look or a spot on your watchlist.

Kongsberg Gruppen (OB:KOG)

Overview: Kongsberg Gruppen is a Norway based defense and technology company that supplies air defense systems, remote weapon stations, missiles, command and control software, subsea sensors and autonomous platforms to military and civilian customers worldwide, including long term work on programs like the F 35 fighter jet and uncrewed underwater and surface vessels.

Operations: Kongsberg Gruppen reports NOK 2,126 million in revenue from its Other segment, offset by NOK 1,179 million of eliminations and a NOK 34,778 million segment adjustment that reflects the bulk of reported revenue across its core defense and discovery activities.

Market Cap: NOK 241.97b

Kongsberg Gruppen is positioned at the center of Europe’s push for greater defense self sufficiency, supplying air defense, missiles, counter drone systems and dual use subsea technology at a time when the Ukraine conflict is exposing dependence on Chinese hardware. Analysts currently forecast strong earnings and revenue growth, helped by a record NOK 158b backlog and major Joint Strike Missile contracts. The current P/E of 45.9x indicates that expectations are already high. The company’s reported 40% Return on Equity and 14.8% margins are appealing to some investors, but they also need to weigh risks such as possible shifts in government budgets toward sustainability, tighter export controls and the execution challenge of turning a large backlog into steady, high quality earnings over time.

Kongsberg Gruppen’s record NOK 158b backlog and 45.9x P/E suggest expectations are already intense. The next question is whether the growth story still stacks up against analyst forecasts for analyst forecasts for Kongsberg Gruppen

Leonardo (BIT:LDO)

Overview: Leonardo is an Italian aerospace and defense group that builds helicopters, military and training aircraft, defense electronics, cyber security systems and space technologies for governments and commercial customers worldwide.

Operations: Leonardo generates most of its revenue from Defence Electronics & Security at €8.5b, Helicopters at €5.9b and Aeronautics at €4.4b, with smaller contributions from Space at €1.0b, Cyber & Security Solutions at €0.8b and Other Activities at €0.7b, partly offset by €1.4b of eliminations.

Market Cap: €29.06b

Leonardo gives you broad exposure to Europe’s push for more independent defense and cyber capability at a time when the EU’s reliance on Chinese drone parts is under scrutiny, and the company’s strength in defense electronics, integrated air defense and helicopters sits directly in that discussion. Earnings growth of 78.9%, a P/E below the wider Aerospace & Defense industry and analyst targets materially above the current share price together point to a story where expectations are not extreme relative to recent progress. At the same time, high leverage, Aerostructures weakness and a high profile CEO transition keep execution risk front and center, which is exactly why many investors are watching closely rather than looking away.

Accelerating earnings, a P/E below many peers and a CEO change make Leonardo look like an underappreciated reset story. See how the full analyst forecasts for Leonardo fits with that thesis, and what the market may be missing.

RENK Group (XTRA:R3NK)

Overview: RENK Group is a German engineering company that supplies customized drive systems, transmissions, gearboxes and related services for armored vehicles, naval vessels, industrial plants and emerging energy applications worldwide.

Operations: RENK Group generates most of its revenue from Vehicle Mobility Solutions at €891.4m, followed by Marine & Industry at €372.5m and Slide Bearings at €127.5m, partly offset by €14.3m of consolidation adjustments.

Market Cap: €4.40b

RENK Group sits squarely in the conversation about Europe’s dependence on foreign defense hardware, with its armored vehicle and naval drive systems directly tied to efforts to strengthen regional self sufficiency and reduce exposure to Chinese suppliers. Order growth linked to modernizing land and sea platforms, a rising share of high margin aftermarket work and earnings that recently grew more than 100% year on year all point to a business with improving visibility. This is the case even though the P/E is higher than many machinery peers and the balance sheet carries meaningful debt. For investors who can handle political and funding risk, as well as questions about how quickly RENK adapts to electrified drive technology, the key focus is how these defense spending trends affect its order backlog, margins and future cash flows.

Accelerating orders, a rising share of high margin aftermarket work and meaningful debt make RENK Group hard to ignore right now, so see how the analyst forecasts for RENK Group lines up with the real risk in its backlog and technology shift

The three stocks covered here are just a starting point, and the full Defense Technology and Aerospace Sector screener has surfaced 40 more companies with equally compelling stories around defense demand, supply chain shifts and aerospace programs, all organized inside the Defense Technology and Aerospace Sector screener. Use Simply Wall St to identify and analyze the specific catalysts, balance sheet profiles and business narratives that matter most to you so you can focus on the highest conviction ideas in this space.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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