Leonardo’s Order Momentum and New Engine Contract Fail to Lift Shares from Sector-Wide Slump

Leonardo's strong performance (31% order growth, new engine deal) contrasts with 23% stock decline due to defence headwinds. Jefferies sees 36% upside.

Leonardo’s operating performance keeps delivering, but the market seems to be looking the other way. The Italian defence group has secured GE Aerospace as the engine supplier for 23 AW149 multi-role helicopters destined for the British armed forces, a deal that includes spare powerplants, replacement parts and a long-term support arrangement. The CT7-2E1 engines powering the helicopters are already in service on Leonardo’s AW149 and AW189 platforms and offer field-level repairs, cutting depot turnaround times and maintenance costs for operators. Yet the stock barely flinched, trading around €50.08 on Wednesday, down 1.34% on the day.

That slide is part of a deeper pullback. Leonardo has shed more than 23% from its 52-week high of €65.50 hit in March 2026, and the shares now sit 1.89% below their 50-day moving average of €51.25 and 5.67% beneath the 200-day average of €53.30. Over the past seven sessions the decline has accelerated to 5.77%, while the one-month loss stands at 4.08%. The relative strength index, at 46.3, points to neither oversold nor overbought conditions — a neutral reading that offers little directional clue.

The broader defence sector provides some context. The STOXX Europe Targeted Defence Index has lost 14% over the last six months, and Leonardo’s 13% decline over the same period is almost perfectly in line with the benchmark. Political headwinds have intensified the pressure: Democratic US senators blocked the NDAA defence budget for fiscal year 2027 on 14 July, leaving roughly $1.14 trillion of planned military outlays in limbo. Combined with persistent tensions in the Middle East, the uncertainty has weighed on sentiment towards European defence names across the board.

Operationally, the picture looks far brighter. Leonardo’s order intake surged 31% in the first quarter of 2026 to more than €9 billion, pushing the total backlog to about €56.8 billion. Revenue rose 7% and EBITA jumped 33% over the same period — growth rates that analysts at Jefferies describe as hard to reconcile with the current share price. Jefferies has a Buy rating on the stock with a consensus price target of €68.33, implying roughly 36% upside from current levels. Some market watchers have taken to calling Leonardo a “forgotten strong buy” because the financial results and the equity valuation have drifted so far apart.

Beyond the core defence business, the group is tapping into Italy’s expanding space sector. At a strategy summit in Milan on 13 July, government officials valued Italy’s space industry at €3.1 billion, up from €1.9 billion in 2021. Aerospace exports have climbed 23.3% since 2022, supported by more than €10 billion in state incentives. Leonardo also has a presence in NATO’s DIANA innovation accelerator, which on 14 July selected ten projects for its “Decision Superiority” initiative — each receiving €100,000 in seed funding to integrate artificial intelligence into military systems, a field where Leonardo already holds technology.

The helicopter engine contract is the latest in a string of wins. Earlier, NATO awarded Accenture a seven-year contract worth roughly €200 million for its “Protected Business Network” programme, with Leonardo handling the zero-trust architecture underpinned by its own cybersecurity platform. The group has also launched two “Solvers Wanted” challenges seeking external partners in photonic technologies and opto-electronic co-integration, with applications open until 15 September 2026.

Investors now have a clear set of catalysts on the calendar. Leonardo publishes its half-year results on 30 July 2026, and the numbers will show whether the first-quarter order momentum has carried through. Further ahead, the ESA ministerial conference in Rome on 15 December 2026 is seen as the next major event for long-term procurement and space infrastructure contracts. For now, the market seems to be waiting for something to bridge the gap between a €29.77 billion company firing on all operational cylinders and a share price stuck near the €50 mark.