Elbit Systems Ltd. (ESLT) presents a compelling investment opportunity within the burgeoning global defence sector. Driven by escalating geopolitical tensions and a renewed focus on military modernisation, ESLT is well-positioned to capitalise on rising defence budgets worldwide. This report offers a comprehensive investment thesis for ESLT, combining rigorous quantitative analysis with qualitative insights into the company’s competitive advantages and future prospects.
Executive Summary
Recommendation: Buy
Price Target (12-Month): $310.00
Upside Potential: 40.9%
Elbit Systems stands to benefit significantly from the global surge in defence spending, particularly within its core markets of Europe and Israel. The company’s diversified portfolio of advanced defence electronics, including precision-guided munitions (PGMs), unmanned aircraft systems (UAS), and C4ISR technologies, positions it to capture a growing share of this expanding market. ESLT’s consistent revenue growth, robust backlog, and commitment to innovation provide a solid foundation for long-term value creation.
Industry Overview
The global defence market is experiencing a period of sustained growth, fuelled by heightened geopolitical uncertainties and ongoing military conflicts. According to the Stockholm International Peace Research Institute (SIPRI), global military expenditure reached $2.24 trillion in 20221. This upward trajectory is expected to continue, driven by factors such as NATO’s commitment to increased defence spending and the ongoing modernisation efforts of various armed forces worldwide.
Company Analysis
Elbit Systems has demonstrated consistent financial performance, marked by strong revenue growth and a healthy backlog. In Q1 2025, the company reported revenue of $1.9 billion, representing a 22% year-over-year increase2. This growth is underpinned by a substantial backlog of $23.1 billion, which provides significant revenue visibility for the coming years3. ESLT’s diversified product portfolio and focus on technological innovation have enabled the company to secure key contracts with various governments and defence organisations.
Key Strengths:
- Technological Leadership: ESLT maintains a strong focus on research and development, resulting in a portfolio of cutting-edge defence technologies.
- Diversified Product Portfolio: The company offers a wide range of defence solutions, catering to diverse customer needs.
- Strong Customer Relationships: ESLT has established long-term relationships with key defence organisations globally.
Investment Thesis
Our investment thesis for ESLT rests on the following key pillars:
- Escalating Defence Spending: The global increase in defence budgets creates a favourable environment for ESLT’s growth.
- Technological Advantage: The company’s focus on innovation and its portfolio of advanced technologies provide a competitive edge.
- Robust Backlog: ESLT’s substantial backlog provides revenue visibility and supports future growth projections.
Valuation & Forecasts
We employ a Discounted Cash Flow (DCF) model to determine our price target for ESLT. Our base case scenario assumes a weighted average cost of capital (WACC) of 9% and a terminal growth rate of 4%. Sensitivity analysis and scenario planning are incorporated to assess the potential impact of varying assumptions on the valuation.
| Scenario | Probability | Revenue Growth (5-Year CAGR) | Terminal Growth Rate | Price Target |
|---|---|---|---|---|
| Base Case | 60% | 15% | 4% | $310.00 |
| Upside Case | 20% | 20% | 5% | $360.00 |
| Downside Case | 20% | 10% | 3% | $260.00 |
Our forecasts for key financial metrics over the next three years are presented below:
| Year | Revenue ($ billions) | EBITDA ($ billions) | Free Cash Flow ($ billions) |
|---|---|---|---|
| 2026E | 8.8 | 1.5 | 1.0 |
| 2027E | 10.1 | 1.7 | 1.2 |
| 2028E | 11.6 | 2.0 | 1.4 |
Risks
While the outlook for ESLT is positive, certain risks warrant consideration:
- Geopolitical Risks: Heightened geopolitical tensions could impact the company’s operations and contract awards.
- Competition: The defence industry is competitive, and ESLT faces competition from established players.
- Supply Chain Disruptions: Potential disruptions to global supply chains could impact the company’s production and delivery timelines.
Recommendation
Based on our analysis, we recommend a Buy rating for Elbit Systems Ltd. (ESLT) with a 12-month price target of $310.00. We believe that the company is well-positioned to benefit from the ongoing growth in the global defence market and that its technological leadership, diversified product portfolio, and strong backlog provide a solid foundation for future growth.
1 Stockholm International Peace Research Institute (SIPRI). (2023, April 24). World military expenditure passes $2.2 trillion for first time. SIPRI.
2 Elbit Systems Ltd. (2025, May 20). Elbit Systems Reports First Quarter 2025 Results. Elbit Systems.
3 Elbit Systems Ltd. (2025, May 20). Earnings Call Transcript – Elbit Systems Beats Q1 2025 Earnings Expectations (93CH). Seeking Alpha.
