MTU AeroEngines will deliver engines for future european military jets

France has signed a contract for the next phase of development of the next-generation European FCAS jet program. According to the French Ministry of the Armed Forces, the contract included both larger companies such as Dassault Aviation and Airbus as well as smaller companies including Eumet, a joint venture of aircraft engines producer, Germany's MTU Aero Engines (MTX.DE):

• Future Combat Air System (FCAS) is a military program launched in 2017 by Chancellor Angela Merkel and President Emmanuel Macron. The program ultimately aims to enable the exit from service of Europe's flagship Eurofighter and Dassault Rafale fighters. Its core is to be a combination of manned and unmanned aircraft, for which engines will be developed and manufactured by the MTU concern. The estimated completion of the program before the war in Ukraine predicted completion by 2040, but in the face of geopolitical turmoil we can expect the program to be accelerated;
• MTU is a German company that produces engines for civil and military aviation. The company has a rich history and cooperation in the production of advanced aerospace components with General Electric or Lockheed Martin. The company has production spread out in many locations around the world (including the US and Poland) with the announcement in 2019 that Serbia will become the center of its repair services. Three years ago in December, the company signed an agreement with Safran according to which the companies will share the work of developing, producing and selling the next generation of engines for the FCAS program through the joint venture Eumet. The Spanish company Indra, which is participating in the program, has already announced that it will receive €600 million as part of the technological development phase of the program. This is expected to create an additional 1,400 jobs for Indra. 

The global geopolitical risk index has risen nearly 5 times since 2018 and has climbed nearly 100% above levels from the day the war in Ukraine broke out. The rise in the index is causing investors to adjust their positions depending on the scale and location of tensions and to take a more defensive stance, the beneficiary of which may be the stocks of companies that can benefit from the trend in development and arms purchases. Source: BlackRock

Shares of MTU AeroEngines have fared significantly better than the German bluechip index this year (yellow shows DAX contract quotes). Although the company has rebounded by nearly 100% from the Covidian bottom, it still has not returned to 2019 price levels. At the same time, the stock, despite positive reports, is starting a corrective movement of the recent dynamic increases, which we can justify 'profit realization' and exit 'on the facts'.Source: xStation5