19 February 2025
If you are covering BAE System’s full year results, please find comments below from Matt Dorset, equity analyst at Quilter Cheviot:
"BAE Systems has delivered a robust set of full-year results this morning, showcasing solid growth and exceeding consensus expectations across the board. Organic sales increased by 9%, while underlying earnings (EBIT) and earnings per share (EPS) rose by 14% and 10%, respectively.
“The company reported sales growth across all five segments, with particularly strong performances in the ‘electronic systems’ and ‘platforms & services’ segments. The significant demand for BAE’s products and services is evident, with the order backlog reaching a record high of nearly £80 billion, almost three times its annual sales.
“We continue to see structural tailwinds supporting BAE, driven by increased global defence spending. The recent discussions at the Munich conference have further highlighted the necessity for heightened defence budgets. For 2025, BAE is guiding to mid-point sales growth of 8%, EBIT growth of 9%, and EPS growth of 9%, alongside a 10% increase in the dividend.
“BAE trades at 18 times FY25 EPS, a significant premium to historical levels, but this is more than justified in our view. We anticipate an EPS annual growth rate (CAGR) of at least 10% over the next three years.
“European defence stocks, including BAE, stand to benefit significantly from the shift to increased defence spending. Not only will larger defence budgets drive demand, but Europe is also likely to focus on enhancing its own defence production capabilities rather than relying on US exports.
“BAE Systems, as a pureplay UK defence company with substantial exposure to European demand, is well-positioned to capitalise on this. The ongoing strategic defence review in the UK and the anticipated EU defence white paper are likely to emphasise the need for increased defence spending, further supporting BAE’s growth prospects."
