7 May 2026
If you are covering BAE Systems’ and Rheinmetall’s latest financial results, please find below a comment from Matt Dorset, defence analyst at Quilter Cheviot:
“BAE has had a strong start to the year, and are trading in-line with expectations both operationally and financially. Results continue to be supported by growing defence budgets across all of BAE’s key markets, and management sees significant opportunities in areas including space systems, missile and air defence systems, drones and counter drone technology, and electronic warfare.
“In the release BAE also identified some notable order intake which demonstrates continued strong demand, including a contract for support of Turkey’s recently ordered Eurofighter fleet, and significant air defence demand at MBDA, and artillery systems for Sweden. Put simply, the current geopolitical situation continues to drive demand for defence companies.
“Guidance for 2026 has been reiterated. BAE targets 7-9% sales growth, and 9-11% growth in earnings and earnings per share, and we would not be surprised if BAE increase this guidance throughout the year.
“In terms of valuation, BAE is trading on 22x 2027 earnings, a significant premium to history but more than justified in our view given very strong mid-term growth prospects underpinned by increasing defence budgets across the world. Any acceleration in UK defence spending plans or success for Trump in pushing through a much-increased defence budget are additional catalysts and should help keep demand for BAE elevated for some time.
“German defence company Rheinmetall also released first quarter results this morning. As had been pre-released, sales grew 8% year on year but this was significantly behind expectations and left earnings per share 11% below consensus. Reassuringly, this weakness is due to phasing of deliveries and a tough comparison to last year as revenue from Q2 2025 was pulled into Q1 2025. Rheinmetall reiterated its guidance though, and expect the weakness in the first quarter to be offset by strength in the next. This leaves Rheinmetall continuing to target very fast growth with sales growth of 40-45% expected, supported by a significant increase in German defence spending.”
