Saab, a Swedish defense giant, has seen an 80% rally in its stock price, driven by surging demand for military equipment. The company reported strong second-quarter earnings, beating expectations with sales of $2.55 billion and an operating profit (EBIT) of $280 million, compared to analyst estimates of $2.39 billion and $240 million respectively. This performance is largely attributed to Europe's rearmament efforts and the ongoing conflict in Ukraine, which have significantly boosted the defense sector.
The company's order backlog reached a record $31.77 billion in the quarter ending June, a substantial increase from $19.76 billion a year prior, marking its fifth consecutive quarter of growth. New order bookings in Q2 totaled $6.84 billion, surpassing FactSet estimates of $5.71 billion, and included a significant $4.7 billion Polish submarine deal. CEO Micael Johansson highlighted that the first batch of a $2.5 billion deal with Ukraine for Gripen fighter jets has been delivered, and noted that NATO Secretary General Mark Rutte indicated an order of up to 10 spy planes from Saab, potentially worth nearly $5 billion.
Johansson emphasized the need for European governments to rethink weapons procurement, advocating for long-term partnerships with industry over fragmented national purchases. While Saab's stock initially surged by as much as 4.5% and later settled at a 9.1% gain in afternoon trading in Stockholm, the broader European Stoxx 600 index was down by 0.6%. Despite booming sales and increasing profitability, some investors question whether valuations have outpaced the industry's capacity to deliver. Other Swedish defense companies like BAE Systems Hägglunds, makers of the CV90 infantry fighting vehicle, have also seen substantial growth, with revenues increasing fivefold since 2020 and an order pipeline of 600 vehicles, with a prospective joint order for 500 more from several European nations.
