BAE Systems results likely to remain 'steady as she goes' rather than firing on all cylinders
Published: 14:51 18 Feb 2025 GMT
BAE Systems PLC's (LSE:BA.) last update in the autumn was "steady as she goes", analysts said, but even though shares in the sector have surged in recent days on expectations of greater European defence spending, the FTSE 100 company is expected to remain on an even keel when it publishes final results on Wednesday.
Panmure Liberum analysts expect no major surprises, citing the company’s November trading update, where it provided a small guidance upgrade.
Currency swings could result in results slightly below guidance, but underlying performance is expected to be marginally ahead.
The first-half to October showed order intake remained strong, with a book-to-bill ratio of 1.2x, down from 1.5x and 1.7x in previous years.
The broker noted that BAE’s growth outlook is "bipolar", with US growth even at best seen in low single-digit, "resulting from a virtually flat budget outlook in the medium term, or at worst, sharp cuts to fund tax cuts".
In contrast, the UK, Europe and Australia are expected to see high single-digit growth driven by increasing budgets and export demand, as other analysts have highlighted recently.
This suggests mid-single-digit organic growth, with further benefits from the Ball acquisition and share buybacks in 2025.
BAE’s share price has declined in recent months but remains above the broker’s one-year target of 1,335p, while below its three-year target of 1,555p. Panmure Liberum reiterated its Buy recommendation, leaving its price targets unchanged ahead of the results.
Even if the numbers themselves turn out to be relatively low key, "other factors in the defence market environment are much noisier and demanding of attention," the analysts wrote.
