Defense stock Leonardo DRS (DRS) got rattled on news of a secondary stock offering but has held up since then. The company sees growing demand for its military and defense products as global threats and conflicts increase.
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The defense stock sold off on Nov. 16 after a subsidiary of the parent company announced a secondary public offering of more than 18 million shares of common stock. Leonardo announced it was not offering any shares in this transaction and would not receive proceeds from the sale of shares.
Leonardo designs and makes advanced sensing, network computing, force protection and electric power and propulsion technologies for the U.S. military and defense subcontractors. The company sees the U.S. government’s bolstered fiscal 2024 defense budget of $826 billion as a tailwind.
Defense Stock Back In Buy Zone
The stock broke out of a flat base on Oct. 10, clearing a 17.96 buy point following the outbreak of the Israel-Hamas war. DRS popped some more after the company beat third-quarter earnings and sales estimates on Nov. 2.
The defense stock reached a 52-week high on Nov. 15. But the next day, shares sold off 11.2% in heavy volume on the stock offering news. Shares, however, found support at the 50-day moving average.
DRS also held above the buy point and is back in the 5% buy zone of the flat base, which reaches to 18.86.
Leonardo’s third-quarter profit increased 67% over last year and greatly improved from the 6% and 63% drops in the prior two quarters. Sales grew 11% after six quarters of flat or declining sales.
FactSet estimates show full-year EPS of 72 cents, down from 84 cents in 2022, then a rebound to 83 cents in 2024. Full-year sales are expected to rise around 3.2% in 2023 and nearly 7% in 2024.
The stock appeared in Stock Spotlight earlier in the week, but dropped off on Friday.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
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