Why FTSE MIB's Near‑Record Rise Could Signal a Hidden Risk for Your Portfolio

Key Takeaways

• FTSE MIB is within striking distance of its all‑time high, driven largely by energy and auto stocks.
• Eni posted a 35% YoY jump in adjusted Q4 earnings, lifting the index but raising questions about sustainability.
• Stellantis defied a weak 2025 outlook by hiking revenue growth guidance, sparking a 4.2% surge.
• Prysmian’s record EBITDA is offset by a sky‑high valuation that could tempt a correction.
• Leonardo’s solid results were eclipsed by geopolitical tension over US‑Iran talks, dragging the stock down.
• Sector‑wide, energy, automotive, and defense are the new growth poles, but each carries distinct risk vectors.

You missed the warning signs in Italy’s market rally, and it may cost you.

Why Eni's Earnings Surge Boosts FTSE MIB Momentum

Eni’s 2.5% jump on the day reflects a 35% year‑on‑year increase in adjusted fourth‑quarter earnings. The driver? A blend of aggressive upstream exploration, higher realized oil prices, and tighter refining spreads. In simple terms, refining margins measure the profit per barrel after converting crude to finished products; they widened by roughly 120 basis points this quarter, adding a healthy tailwind to earnings.

From a sector perspective, the broader energy index in Europe has been on an upswing as supply constraints persist post‑pandemic. Eni’s performance aligns with peers like TotalEnergies and BP, which also reported double‑digit earnings growth. Historically, when a major energy player posts a 30%+ earnings jump, the national index tends to rally for the next 4‑6 weeks before a profit‑taking correction sets in.

Investors should note that Eni’s growth is partially fueled by non‑recurring items—one‑off exploration successes that may not repeat. The forward‑looking guidance hints at a modest slowdown in Q1, suggesting the current rally could be front‑loaded.

Stellantis Revenue Outlook vs 2025 Forecast: What It Means for the Auto Sector

Stellantis surged 4.2% despite a gloomy 2025 earnings projection that missed consensus. The catalyst was a revised revenue‑growth forecast that now expects a 7% CAGR through 2027, up from the prior 4% estimate. This optimism stems from the rollout of new EV platforms and a stronger European market share in the compact segment.

Comparatively, Tata Motors and Volkswagen are also pivoting toward electrification, but Stellantis’ aggressive pricing strategy for its upcoming models gives it a relative edge. In the past, when an automaker upgraded its revenue outlook while keeping earnings modest, the stock often outperformed the sector for the subsequent quarter, as analysts re‑price future cash‑flow expectations.

Technical traders will notice that Stellantis broke above its 50‑day moving average, a classic bullish signal. However, the underlying 2025 earnings miss indicates that profitability may lag behind revenue, a classic “growth‑vs‑margin” trade‑off that warrants caution.

Prysmian's Record EBITDA: Valuation Concerns Explained

Prysmian edged up 0.1% after reporting record EBITDA, a metric that captures earnings before interest, taxes, depreciation, and amortization. While a strong EBITDA suggests operational efficiency, the market is skeptical because the price‑to‑earnings (P/E) multiple sits north of 30x—far above the sector average of 15‑20x.

Peers such as Nexans and CommScope have similar revenue profiles but trade at significantly lower multiples, implying Prysmian may be overvalued. Historical patterns in the telecom cable industry show that firms with lofty valuations often experience mean‑reversion corrections once growth decelerates, typically within 12‑18 months.

From a macro view, the rollout of 5G infrastructure across Europe is a tailwind, but the upcoming EU budget constraints could throttle capital spending, adding a layer of demand risk.

Leonardo's Q4 Strength and Geopolitical Risks

Leonardo slipped 0.9% despite posting a solid fourth‑quarter performance. The drop was triggered by market anxiety over renewed US‑Iran negotiations, which could impact defense contracts tied to Middle‑East stability. In defense terms, order backlog—the value of contracts yet to be fulfilled—remains robust, but any geopolitical de‑escalation could shrink future procurement budgets.

Competitor analysis shows that Airbus Defence and BAE Systems have diversified geographically, insulating them slightly from a single‑region shock. Leonardo’s exposure to the Mediterranean theater, however, makes it more vulnerable to policy shifts.

Historically, defense stocks have demonstrated a “flight‑to‑safety” pattern when tensions rise and a “sell‑off” when diplomatic breakthroughs occur. The current environment suggests heightened volatility, meaning investors should be prepared for short‑term swings.

Impact of the Mixed Earnings Wave on Your Portfolio

The FTSE MIB’s 0.5% gain to 47,426 places it tantalizingly close to its record high, but the index’s composition is now heavily weighted toward energy, auto, and defense. This concentration amplifies sector‑specific risk. A sharp move in oil prices, a regulatory shock in the EV space, or a sudden geopolitical flare‑up could swing the index by more than 2% in a single day.

For diversified investors, the key question is whether to ride the rally or rotate into less correlated assets. The answer hinges on your risk tolerance, time horizon, and conviction in the underlying earnings narratives.

Investor Playbook: Bull vs. Bear Cases

Bull Case

• Energy continues to benefit from tighter supply, keeping Eni’s margins elevated.
• Stellantis successfully executes its EV roadmap, converting revenue growth into margin expansion.
• Prysmian capitalizes on 5G rollout, justifying its premium valuation.
• Leonardo secures new contracts as NATO members increase defense spending amid lingering tensions.
• FTSE MIB breaches the 48,000 mark, attracting inflows from European ETFs.

Bear Case

• Oil price correction erodes Eni’s refining spreads, compressing earnings.
• Stellantis faces cost overruns on EV platform development, delaying profitability.
• Prysmian’s valuation contracts as 5G capex slows under tighter EU budgets.
• Leonardo’s order backlog shrinks if US‑Iran talks lead to de‑escalation and reduced arms sales.
• Geopolitical calm triggers a sector rotation away from defense and energy, pulling the FTSE MIB down.

Weigh these scenarios against your portfolio goals and decide whether to double down on the Italian champions or hedge with broader European exposure.