FRANKFURT (dpa-AFX) - German defense stocks moved in different directions on Friday following a new study by Bank of America (BofA). In the MDax index of mid-cap companies, shares of tank transmission manufacturer Renk rebounded by 3.3 percent to EUR51.09, while radar specialist Hensoldt slipped by 1.5 percent to EUR68.05. Meanwhile, Rheinmetall shares ranked among the weakest performers in the Dax.

After the recent market correction sparked by renewed negotiations to end the war in Ukraine, BofA analyst Benjamin Heelan has adjusted his sector preferences. He sees significant long-term potential driven by increased defense spending among NATO countries. These expenditures are expected to substantially boost orders for Renk in the coming year. As a result, Heelan made a sharp turnaround on the tank transmission manufacturer, upgrading it from "Underperform" to "Buy" with a new price target of EUR61, and recommended purchasing the stock ahead of this anticipated upswing, citing its now attractive valuation.

For Hensoldt, however, 2026 is likely to be a transitional year in which the radar specialist may lag behind its industry peers. According to Heelan, new orders in the first half of the year are already largely priced in. Consequently, he expects little in the way of catalysts for the share price and downgraded Hensoldt to "Neutral" with a price target of EUR77. While Heelan remains positive on Rheinmetall, he also lowered its price target to EUR2,215. Shares in Germany's largest defense contractor recently fell by one percent to EUR1,525.

Heelan takes a critical view of newcomer TKMS. He initiated coverage of the naval shipbuilder with an "Underperform" rating and a price target of EUR55.70, noting that the shares are relatively expensive given their growth prospects. Furthermore, TKMS's business model is somewhat riskier due to the long cycles involved in submarine orders. Nevertheless, shares rose 0.5 percent to EUR67.30. It was already announced on Wednesday that TKMS will be added to the MDax in December.

Heelan also reaffirmed his "Buy" recommendation for Airbus. The aircraft manufacturer is benefiting from stabilized supply chains and is expected to ramp up production. Airbus recently lowered its delivery target and must deliver another 133 jets in December to meet the revised forecast. Airbus shares climbed 0.8 percent to EUR198.62, leaving considerable room to reach the new price target of EUR269.

Additionally, Heelan upgraded engine manufacturer MTU to "Buy" with a price target of EUR410. The shares subsequently advanced 2.4 percent to EUR356.70, placing them among the top performers in the Dax. Compared to competitors such as Safran and Rolls-Royce, MTU shares have valuation ground to make up. Moreover, the engine maker is also benefiting from easing supply chain pressures./niw/nas/stw