BAE Systems (LON: BA.) has reaffirmed its full-year guidance, initially upgraded in July, citing robust operational and financial performance.
The defense giant has secured over £27 billion in orders year-to-date, with anticipated agreements expected before year-end.
Trading in the second half of 2025 aligns with expectations, supported by consistent delivery of critical capabilities. Future growth is underpinned by a funded backlog, key program positions, and investments in technology and personnel.
Revenue: BAE Systems projects 2025 sales growth of +8% to +10% compared to 2024 (£28.3bn).
Profit & Margins: Underlying EBIT is expected to increase by +9% to +11% in 2025 compared to 2024 (£3.0bn).
Cash & Balance Sheet: The company anticipates free cash flow (FCF) exceeding £1.1bn in 2025. Total cash returned to shareholders is projected around £1.5bn, including dividends and £500m in share repurchases.
The company's strong financial standing allows for continued investment in organic growth, strategic acquisitions, dividend payouts, and share buybacks.
Charles Woodburn, BAE Systems Chief Executive, said: “We continue to deliver strong financial and operational performance in the second half of the year, underpinning the full-year guidance we upgraded in July. The recent agreement with Türkiye for Typhoon aircraft and announcement by Norway in respect of Type 26 frigates demonstrate sustained global demand for our leading defence capabilities.”
Analysts will be closely watching the impact of currency fluctuations, with a 5-cent movement in the GBP:USD exchange rate affecting sales by approximately £525m and underlying EBIT by around £75m.
The weighted average number of ordinary shares to calculate full-year underlying EPS is expected to be around 3.0bn.
The company expects significant opportunities across its business, including space systems, missile and air defence systems, electronic warfare, combat aircraft, combat vehicles, frigates, submarines, drones, and counter drones, among others.
Analyst Summary: Bull and Bear Cases
Bull Case:
- Strategic Alignment: BAE Systems' portfolio aligns with the national defense strategies of its customers, amplified by increased NATO spending.
- Order Momentum: Significant orders from Türkiye for Typhoon aircraft (c.£4.0bn) and ongoing Dreadnought program funding (£0.9bn) bolster the backlog.
- US Market Strength: Positive momentum in the US, including support for the AUKUS program and the Golden Dome air defense initiative, bodes well for future growth.
Bear Case:
- Currency fluctuations pose a risk, with a 5-cent movement in the GBP:USD exchange rate impacting sales by approximately £525m and underlying EBIT by around £75m.
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