BAE Systems Stock Surges on Record Sales and Orders

Shares of BAE Systems (LON: BA.) surged on Wednesday following the release of its preliminary 2025 results, which showcased record sales and order intake.

The positive market reaction reflects investor confidence in the company's strategic positioning within a growing defense sector.

BAE Systems reported a 10% increase in sales, reaching £30.7 billion, driven by growth across all sectors. Underlying earnings before interest and tax (EBIT) climbed by 12% to £3.32 billion, translating to a modest 20 basis point increase in return on sales, from 10.6% to 10.8%. Underlying earnings per share (EPS) also rose by 12% to 75.2p.

The company's free cash flow remained strong at £2.158 billion, even with significant capital expenditure near record levels at approximately £1 billion and increased investment in research and development (R&D). Order intake was a robust £36.8 billion, pushing the order backlog to a record £83.6 billion.

Shareholders are set to benefit from a proposed final dividend of 22.8p, bringing the total dividend for 2025 to 36.3p, a 10% increase year-over-year. The company also repurchased 30 million shares at a cost of £502 million, returning a total of £1.529 billion to shareholders through dividends and buybacks.

Driver Breakdown:

• Strong Order Intake: Significant contracts, including the Typhoon aircraft deal with Türkiye and the Norway Type 26 frigate selection, fueled order growth.
• Operational Efficiency: Continued focus on operational performance and disciplined contracting contributed to consistent delivery of critical capabilities.
• Strategic Investments: Investments in R&D and capital expenditure are enhancing agility, efficiency, and capacity for future growth.

Our results highlight another year of strong operational and financial performance, thanks to the outstanding dedication of our employees. In a new era of defence spending, driven by escalating security challenges, we're well positioned to provide both the advanced conventional systems and disruptive technologies needed to protect the nations we serve now and into the future. With a record order backlog and continuing investment in our business to enhance agility, efficiency and capacity, we're confident in our ability to keep delivering growth over the coming years.

Looking ahead, BAE Systems anticipates continued growth, projecting a 7% to 9% increase in sales and a 9% to 11% increase in underlying EBIT and EPS for 2026. The company also forecasts free cash flow to exceed £1.3 billion for 2026 and cumulative free cash flow to exceed £6.0 billion for the period 2026-2028.