The Munich Security Conference, held over the weekend by European officials, discussed the possibility of increased defense spending. This could be an important boost for regional stocks.
Analysts at Citi stated that they estimate a potential 30% sector gain, based on 3% GDP (which is lower than implied increases of 50% due to the time value of money).
The investment company is particularly bullish about the German defense technology firm Hensoldt as well as Swedish defense manufacturer Saab. What can investors expect from these two European defense stocks in 2025?
Hensoldt AG (ETR: HAG)
Hensoldt’s stock rose about 12% after the Munich Security Conference. The European Defense Stock is up over 30% year-to-date.
Citi still expects Hensoldt to continue rising in value in light of an increase in defense spending in the region.
The German multinational is likely to win government contracts and more military projects, as European nations implement their plans for higher defense spending.
Hensoldt will see an increase in revenue. Citi has expressed its confidence in the acquisition by ESG of ESG, which cost more than $700m.
Oliver Dorre, the CEO of Hensoldt said the following to investors in the company’s latest earnings report:
In just 200 days we’ve completed the post-merger Integration of ESG. Hensoldt is consistently expanding its position as a trusted partner for our customers both locally and globally.
Citi isn’t the only one who’s bullish about Hensoldt. Street’s overall consensus on Hensoldt is also “overweight”.
Hensoldt’s shares offer a 0.85% dividend rate, making them incredibly attractive to those looking for a passive source of income.
Saab AB
Saab is another European stock, which Citi analysts believe will also benefit from the increased spending in defense regions.
This aerospace and defence company makes for an exciting choice, given that “Sweden’s defense spending is increasing at a higher rate than the UK (and starting from a smaller base).”
Saab’s sales in Sweden account for about 40 percent of total revenue.
Citi has a bullish view on Saab’s stock, also due to the fact that it reported impressive results in its fourth fiscal quarter. Micael Jönsson, the chief executive of the company at that time told investors:
Saab, in the face of geopolitical uncertainties, is dedicated to be a partner that can help countries build their defence capabilities, and to contribute to increased European capability.
Saab expects to generate positive cash flow in 2025, based on organic growth of 12%-16%. Saab shares are also worth buying because they pay a dividend of 0.63%, similar to Hensoldt.
Street’s consensus Saab rating currently stands at “overweight”, indicating that other firms also believe in its potential.
The post Best European Defense Stocks to Own After Munich Security Conference can be updated as new information becomes available
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