Shares in France's Thales (TCFP.PA) jumped more than 11% on Tuesday, extending a surge in European weapons-related stocks, after the defence and technology firm posted stronger-than-expected 2024 earnings despite losses in its space business.
Europe's largest defence electronics firm said adjusted operating income rose 5.7% on a like-for-like basis to 2.42 billion euros ($2.53 billion) as revenues gained 8.3% to 20.58 billion euros, with defence growth dwarfing gains in aerospace and cyber.
New orders rose by an underlying 6% to 25.29 billion euros.
Analysts had on average expected operating profit of 2.35 billion euros on revenues of 20.14 billion euros, and an order intake of 23.76 billion euros, according to a company-compiled consensus.
Shares in the Paris-based company opened up more than 11%.
Thales, whose shares had already soared alongside those of its peers on Monday after European leaders pledged to boost arms spending, said rising demand had repaid investments in defence capacity.
"Geopolitical instability is a constant and to a great extent it is feeding the investments made by countries in their defence," CEO Patrice Caine told reporters.
Thales said defence sales and profits rose by an underlying 13% last year but aerospace earnings fell by 13.9% on the same constant basis, with R&D and restructuring costs weighing on the space business and blotting out double-digit avionics margins.
Aerospace margins were better than feared despite the problems in space, Jefferies analyst Chloe Lemarie said.
Investors watch Thales' growth on a constant or underlying basis, excluding a spate of acquisitions especially in cyber markets. Thales also bought Cobham Aerospace Communications and sold transport signalling activities to Hitachi Rail last year.
Asked about talks between Thales and Airbus (AIR.PA), as well as Thales' traditional partner Leonardo , on a possible new European venture combining loss-making satellite businesses, Caine said he had no information to share just yet.
"Let us work," he told reporters.
For 2025, Thales predicted like-for-like growth in sales of between 5% and 6% to a range of 21.7 billion to 21.9 billion euros, and a 40-60-point increase in adjusted operating margins to between 12.2% and 12.4%.
It said orders would continue to outpace sales.
Lemarie said the company's freshly minted revenue forecasts probably did not include the full impact of geopolitical developments as European nations hike arms spending further.
Caine noted that some of the shift towards higher defence budgets had already been in place before the weekend summit.
($1 = 0.9529 euros)
