BAE Systems has provided investors with a very healthy trading statement confirming sales growth guidance and a growing order book.
The UK Investor Magazine very recently published an article describing how a number of trends were going in BAE’s favour.
Today’s trading update confirmed those trends. Sales are expected to grow 10-12% this year as an increase in global defence spending filters through to BAE’s order book.
BAE Systems highlighted a number of standout orders, including a $318m package for M109 Self-Propelled Howitzer support and a $754m order for the production of Armored Multi-Purpose Vehicles.
Margins are forecast to be robust and operating profit is expected to grow to 11-13% in the full year as the company integrates recently acquired Ball Aerospace.
The company expects to generate £1.3bn in free cash flow in 2024.
“There were no big surprises from BAE Systems in today’s update. Defence spending remains high across the group’s sectors and key markets,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
Chiekrie continued to explain global geopolitics were acting as a major tailwind for BAE.
“Many governments are even expected to continue raising their defence budgets amid escalating global tensions. The recent passing of an additional aid package from the US to Ukraine, and the commitment by the UK to grow its defence spend to 2.5% of GDP by 2030 should build further positive momentum for the group, as it looks set to capture a good chunk of this extra spending. The orders placed with BAE are typically long-cycle too, spread over several years, so it gives the group multi-year revenue visibility. An enviable asset to have in uncertain times.
“That’s led BAE to reaffirm all of its full-year guidance, which calls for sales and underlying operating profits to grow by 10-12% and 11-13% respectively. These growth figures are being boosted by the group’s acquisition of Ball Aerospace which closed back in February this year. The integration of the business is going well, with the newly renamed business, Space & Mission Systems, already securing a number of key contacts.”
