Leonardo’s Operational Strength Collides with Defense Sector Gloom as Shares Wobble Near €50

Despite 31% order growth and €56.8B backlog, Leonardo stock falls 23.5% from high as defence sector weakens and US political uncertainty weighs on European shares.

The Italian defense and aerospace group Leonardo keeps churning out strong numbers – first-quarter orders up 31%, EBITA up 33%, and a record backlog of €56.8 billion – yet its stock cannot shake off a persistent downtrend. Shares slipped 1.34% on Wednesday to €50.08, leaving the equity roughly 23.5% below its 52-week high of €65.50 hit in March. Over the past seven days the stock has surrendered more than 6%, and the monthly loss stands at 4.46%.

The disconnect between operational momentum and market performance is not unique to Leonardo. The STOXX Europe Targeted Defence Index has shed 14% over the last six months, and Leonardo’s own 13% decline over the same period tracks that sector-wide slide almost exactly. Against that backdrop, even a fresh strategic win in the UK failed to ignite a rally.

On July 14 Leonardo confirmed it has selected the CT7-2E1 engine from GE Aerospace to power the 23 AW149 helicopters it is offering under Britain’s New Medium Helicopter programme. The choice leverages common components with the army’s existing T700 fleet, simplifying maintenance for the Ministry of Defence. The engines will be assembled and serviced in the UK by StandardAero in Gosport and Barnes Aerospace in Newton Abbot. British government analysts see Leonardo’s Yeovil plant emerging as a global export hub for the AW149, with potential export orders worth up to £15 billion over the coming decade.

Separately, the company is anchoring a push to build a regional aerospace cluster in Lazio. At a supplier meeting in Rome on the same day, Leonardo joined Telespazio and Thales Alenia Space in talks with smaller Italian firms to deepen partnerships. The initiative comes as Italy’s space sector expands rapidly – government officials at a Milan strategy summit on July 13 valued the industry at €3.1 billion, up from €1.9 billion in 2021, supported by over €10 billion in state aid and a 23.3% jump in air and space exports versus 2022.

That optimism, though, is being tested by political headwinds in the United States. On July 14 Democratic senators blocked the National Defense Authorization Act for fiscal 2027, freezing roughly $1.14 trillion in planned defence spending. While the bill is likely to be revived, the uncertainty adds to pressure on European defence stocks already weighed down by geopolitical jitters. Leonardo’s relative strength index stands at 45.7, squarely in neutral territory, and the stock now trades below both its 50-day moving average of €51.25 and its 200-day average of €53.30.

Jefferies, which recently upgraded Leonardo to “Buy” with an average price target of €68.33, sees the share price as a “forgotten Strong Buy” – a case where strong earnings tell a different story from the market. The investment bank points to structural growth in European defence budgets, with NATO and EU members expected to lift spending to 2.1% of GDP in 2026.

For investors, the near-term catalysts remain the outcome of the UK’s NMH tender and the speed at which the €56.8 billion order book converts into revenue and eventually a recovery in the stock. A longer-range milestone is the European Space Agency’s ministerial conference in Rome on December 15, 2026, which is expected to award long-term procurement and space infrastructure contracts. Until then, Leonardo’s shares look likely to stay tethered to the broader sector until either the political fog lifts or the company’s operational acceleration finally overwhelms the macro drag.