Aerospace and Defence Europe Sector Update

Morgan Stanley previews FY25 earnings for European Aerospace & Defence, upgrading Rolls-Royce to Aerospace Top Pick and Hensoldt to Equal-weight. The report emphasizes the shift toward execution and FY26 guidance across the sector.

Key Takeaways

• 1.Focus for FY25 earnings is shifting to FY26 and medium-term guidance, with little appetite for conservatism among investors.
• 2.Rolls-Royce is upgraded to the Top Pick in Aerospace, while Rheinmetall remains the Top Pick in Defence.
• 3.European defence spending is forecasted to rise to approximately 3% of GDP by 2030 to reduce security dependencies.

Table of Contents

• Key Takeaways
• Our View into Numbers
• Defence in 2026 - From Commitments To Contracts
• Aerospace in 2026 - OE vs AM? Own Both
• Airbus
• BAE Systems
• Dassault Aviation
• Hensoldt
• Kongsberg
• Leonardo
• Melrose
• MTU Aero Engines
• Rheinmetall
• Rolls-Royce
• Saab
• Safran
• Thales

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