Gordon Reid Leonardo DRS DRS-Q BUY Jul 15, 2025

They do military applications, like propulsion systems for the navy, radar and detection systems. 80% of business comes from the US Army, but the pressure for NATO countries to build their own defenses will be a tailwind. The US Navy has a huge submarine project that will benefit DRS. DRS has an $8.5 billion backlog.

Last May, they delivered a large revenue beat with 16% growth YOY. Both of their segments did well, driven by growth in propulsion systems and tactical radars. They have exposure to rare earths which have risen in price on the market. They're confident they can navigate tariffs due to their main footprint and supply chain in the US. Also, 20% of business comes from Canada, South Korea and Israel. The numbers are good. Up 46% this year. DRS feel that can benefit from defense spending. They launched a dividend this year, albeit small, but shows confidence, and started a modes share buyback this year. Share have run up, now at 37x PE. Would buy only in a serious pullback.