A Swedish Air Force Saab JAS 39 Gripen jetfighter takes part in the NATO exercise as part of the NATO Air Policing mission, in Alliance members’ sovereign airspace on July 4, 2023.
John Thys | Afp | Getty Images
Shares of Swedish defense giant Saab jumped on Friday morning, after the company reported stronger-than-expected profit and sales growth for the second quarter.
Shares were last seen trading 14.3% higher at 7:01 E.T.
Saab’s operating income for the second quarter came in at 1.98 billion Swedish kronor ($200 million), marking a 49% year-on-year jump and a beat on the 1.71 billion krona expected by analysts polled by LSEG.
Quarterly sales rose by a better-than-expected 30% year-on-year.
The company also hiked its 2025 outlook on Friday, raising its full-year organic sales growth projection to a range of 16% to 20%, up from its previous forecast of between 12% and 16%.
Saab’s shares have surged 131% since the beginning of the year, according to LSEG data.
The stock is one of many in the European defense space that has benefited from a broad regional push to ramp up security budgets.
On Wednesday, the European Commission unveiled a proposal for a 2 trillion euro budget that would include a significant bump in funding for defense. It comes as part of what officials have labelled Europe’s “era of rearmament,” which has already seen the bloc unveil plans to mobilize as much as 800 billion euros ($928 billion) to help member states hike spending on national security.
Meanwhile, members of the NATO military alliance recently agreed to hike their defense spending targets to 5% of gross domestic product (GDP).
Speaking to CNBC’s “Squawk Box Europe” on Friday, Saab CEO Micael Johansson said activity in the European defense market was “really high,” but that Saab had “a great portfolio supporting the demand in the market.”
“What you see in this quarter is that we are ramping up dramatically,” he said. “We have a number of campaigns going now, there’s a big interest and it’s ramped up a bit lately.”
When it comes to the regional defense spending boost — which was triggered after U.S. President Donald Trump pushed for Europe to take greater ownership of its own security — Johansson said Europe needed to take the opportunity to bolster its defense sector.
“The U.S. administration rightly is saying we have to step up in Europe and take a big responsibility for our own security,” he told CNBC.
“So, many countries are now boosting their own defense industries. I do want to see a level playing field, of course, in terms of competition in the market, but I do think we need to buy more European as well — even though we need to have a strong transatlantic link … we have to have this strong European defense industrial base to manage the aggressive neighbor to the east for a long time going forward.”
In a note on Friday, Citi analysts reiterated their “Sell” rating on Saab stock, while conceding that the company had had “a very strong quarter.”
They nevertheless added that their valuation models still pointed to a target price of 374 Swedish krona. After Friday’s rally, that would mark a decline of around 31% from current prices.
“There is currently a strong upwards momentum in European defense spending,” they said. “We estimate it will peak at 3.5% of GDP and we are skeptical of further increases as governments have other uses of cash.”