MTU Aero Engines AG

JPMorgan said in a note Wednesday that European defense investors are favoring companies with long-duration order books and hard-to-replace products, while marking down those whose technology could be displaced. The European defense sector has underperformed local markets by about 6% this year on average, though with wide variation between individual stocks, analyst David Perry noted. JPMorgan rates BAE Systems, Leonardo and Babcock Overweight, saying all three have those defensive characteristics, while investors have significantly de-rated companies such as Rheinmetall, CSG and Renk on fears their technology could be displaced. JPMorgan placed MTU Aero Engines and Leonardo on Positive Catalyst Watch, ahead of MTU's capital markets day on Nov. 30 and Leonardo's industrial plan update in March 2027, and put Rheinmetall on Negative Catalyst Watch, saying it does not expect the company to cut its 2030 sales goal of 50 billion euros even though the bank's own forecast is 36.9 billion euros. Perry said the debate over technology displacement is complex and the answer will not be clear for many years, making investor events at Rheinmetall on Nov. 27 and Renk on Dec. 8 important, and added that Rolls-Royce and Safran should remain strong performers over the medium term and are core holdings.

German stocks moved higher on Tuesday, with the benchmark DAX up 85.61 points or 0.34% at 25,510.02 by noon, extending gains from the previous session. Automakers were broadly higher following reports that France and Germany are pursuing a new initiative to revive the auto industry, with Volkswagen surging 3.6% and Mercedes-Benz rallying 4%. Mercedes-Benz Group reported a second-quarter net profit of 1.065 billion euros, up from 915 million euros a year earlier, while Daimler Truck Holding and BMW moved up 3.75% and 3.7% respectively. Among other gainers, Rheinmetall jumped more than 4% and MTU Aero Engines climbed 3.7%, while Siemens Energy and Infineon Technologies shed 2% and 1.9% respectively.