MBDA, the continent's principal sovereign missile and air-defence prime, is planning a substantial increase in industrial spending to expand capacity as Europe accelerates efforts to meet its defence needs internally. Bank of America Global Research reported that MBDA will lift planned industrial investment to €5 billion for the 2026-30 period, up from €2.4 billion allocated for 2025-29.
The move follows a period of rapid output growth at MBDA. Missile production doubled from 2023 to 2025, and the company expects an additional 40% increase in output in 2026, according to the note. MBDA is owned by BAE Systems, Airbus and Leonardo.
BofA applied a 30x target enterprise value-to-adjusted EBIT multiple to MBDA, which implies a valuation of roughly €55 billion by 2030. Discounting that estimate back to the present yields implied values of around £12.8 billion attributed to BAE Systems and €9.9 billion attributed to Leonardo - amounts equivalent to about 21% of BAE's market capitalisation and roughly 30% of Leonardo's, per the analysis. Following the analysis, BofA raised its price target for Leonardo to €79.5 from €74.5 and assigns a 2,445p price objective to BAE Systems.
At the BofA Global Industrials Conference, BAE Systems' CEO was quoted in the report as saying that MBDA's current growth profile is limited by supply rather than by demand. That observation underlines the rationale for the planned industrial expansion: to increase output capacity where supply-side bottlenecks are constraining deliveries.
The investment programme and valuation assessment arrive as signs of strain emerge in U.S. defence supply channels. Switzerland is reported to be facing a four-to-five year delay on Patriot missile deliveries from the United States and is considering a European Union-sourced alternative as a result. Norway has announced an additional NOK115 billion in mid-term defence spending, with a stated reprioritisation toward munitions, electronic warfare, and short-range air and drone defence capabilities. The Bank of America note also records that the Pentagon is preparing to reallocate $1.5 billion to procure critical missile interceptors.
Within the European defence supplier landscape, BofA's recent analyst calls included an upgrade of Hensoldt to Buy with a price objective of €88.5, and a downgrade of SAAB to Neutral with a price objective of SEK709. The report warns that comments from Rheinmetall about minor delays in German procurement create a near-term overhang for German defence names, and highlights that Hensoldt derives approximately 60% of its sales from Germany.
BofA indicated the SAAB downgrade reflected concerns that consensus estimates for 2026 may be elevated, and that SAAB's valuation premium over peers could shrink if order momentum weakens in the first half of 2026 after a strong fourth quarter in 2025. Market pushback on the Hensoldt upgrade focused on scepticism around near-term upgrades given production capacity constraints; however, BofA maintained that order announcements will remain the central sector driver and that 2026 book-to-bill guidance is still on track.
On the earnings front, BofA revised its forecast for Leonardo for the 2026-30 period, raising adjusted EBITA estimates by between 0.4% and 1.2% across that horizon. The bank's projections foresee Leonardo generating revenues of €32.0 billion by 2030 with adjusted EBITA of €4.2 billion.
Sector implications - The developments affect defence prime contractors, suppliers to missile and air-defence programmes, aerospace manufacturers with defence exposure, and wider industrial supply chains that support increased munitions and electronic warfare production.