Saab Earnings: Delivery Ramp Accelerates Earnings Conversion; Fair Value Estimate Increased by 5%

Key Morningstar Metrics for Saab

• Fair Value Estimate
  : SEK 610
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Saab’s Earnings

Saab SAAB B reported organic sales growth of 23.6% and EBIT growth of 32%, with margins reaching 10% and strong operating cash flow supported by deliveries. Backlog remains high at SEK 274 billion with improved near-term visibility.

Why it matters: The quarter confirms the shift from backlog build to delivery execution. Capacity investments are now translating into revenue, driving operating leverage, margin expansion, and improved cash conversion de-risking near-term earnings.

• Dynamics and surveillance are the strongest contributors, driven by capacity ramp and deliveries; scalable products (missiles, sensors, C-UAS) support higher margins and faster, more repeatable revenue conversion.
• Aeronautics and naval still dilute group returns: T-7 under-absorption, higher research and development amortization, foreign exchange headwinds, and project-driven volatility keep margins below potential, delaying full operating leverage despite strong demand and backlog visibility.

The bottom line: We increase our fair value estimate by 5% to SEK 610 as execution de-risking improves visibility on earnings and cash flow. Shares remain fairly valued. Structural growth is intact, with capacity expansion and mix shift supporting maintained margin expansion.

• Defense growth is underpinned by structural rearmament, with NATO spending rising toward 3.5% of GDP and supporting multiyear demand for missiles, air defense, and surveillance systems with high backlog visibility.
• Earnings quality improves structurally as programs move into serial production and lifecycle support, driving recurring aftermarket revenue, higher margins, and long-term visibility beyond 2030.