Morningstar | Leonardo Records Solid First-Quarter Results; Shares Undervalued
Leonardo Spa reported good first-quarter results with revenue up 11.2% year over year and 80 basis points EBIT margin improvement over first-quarter 2018.Reported revenue of EUR 2.7 billion came in 5% above consensus. EBITA, at reported EUR 163 million, registered less of a surprise, at only 1% above market expectations. While the shares have rallied this year, they are still trading below our fair value estimate. We maintain our no-moat rating and EUR 12 fair value estimate.
The start of the year showed positive momentum in firm’s key businesses--defence electronics and helicopters.The largest business segment, defence electronics, was the strongest contributor. In the quarter, revenue was up 16%, driven mainly by high activity levels in DRS and Airborne Systems. The 90-basis-point EBITA margin expansion was the result of both volumes and good profitability in all business areas. Good news also came from the order intake that reached EUR 1.5 billion, compared with EUR 1 billion last quarter, with DRS, U.S. military programs, and the electronics division contributing. In the helicopter business segment, orders were up 13% year over year, mainly due to the supply contract signed with the Spanish Ministry of Defence. Revenue grew by 8.4% year over year, with strength in governmental programs more than offsetting the delays in civil customers deliveries. Customer support services for helicopters, which plays an important role for stable revenue streams and profitability, also recorded good performance.
Leonardo is the holding company for The Finmeccanica Group, and is responsible for guiding and controlling industrial and strategic operations, coordinates its subsidiaries. The Finmeccanica Group operates in the Aerospace and Defence sector, which includes the Helicopters, Defence and Security Electronics, Aeronautics, Space and Defence Systems segments; and in the Transportation sector, which also includes Fata S.p.a., in addition to the companies operating in the transportation sector.
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