FTSE 100 weapons builder BAE Systems has reaffirmed its full-year trading guidance, with the share price rising to £13.90 per share in Thursday’s session. The company expects to grow sales between 10% and 12% in 2024, with underlying earnings before interest and tax (EBIT) increasing between 11% and 13%. Full-year free cash flow is predicted to exceed £1.3 billion, with cumulative free cash flow from 2024 to 2026 expected to total over £5 billion.
The demand for BAE Systems’ hardware is on the rise, driven by increased defence spending from Western governments following Russia’s invasion of Ukraine. The company’s share price has jumped by approximately 150% since the beginning of 2022, reflecting substantial revenue and order growth. BAE reported record orders of £37.7 billion in the previous year, leading to an order backlog of £69.8 billion, a significant improvement from the previous year.
In the context of positive market conditions and high defence spending, BAE Systems announced the renaming of its Ball Aerospace unit to Space & Mission Systems. The company acquired the division for $5.6 billion in February and noted that the integration process is underway, with successful contract wins. BAE also plans to increase capital expenditures, focusing on maritime, munitions, and Swedish combat vehicle production capacity. Additionally, the company aims to hire 2,700 new apprentices, graduates, and undergraduates to support its growth strategies.
CEO Charles Woodburn expressed confidence in the company’s performance, stating that trading is in line with expectations and operational performance remains strong. The backlog and program commitments provide assurance in the long-term value creation model. BAE’s global presence and diverse portfolio of products and services position it well for top-line growth, margin expansion, and cash generation in the coming years.
BAE Systems remains optimistic about the future, particularly with defense spending remaining high across sectors and key markets. The recent US supplemental aid package to Ukraine and the UK Government’s commitment to spending 2.5% of GDP by 2030 are expected to further boost momentum. The company’s robust order backlog, strong revenue growth, and strategic investments in key areas indicate a positive outlook for sustained growth and profitability.
Overall, BAE Systems continues to demonstrate resilience and strength in the global defence market. With a solid financial performance, increasing orders, and strategic investments in key areas, the company is well-positioned for growth in the coming years. The positive market conditions, combined with high demand for its products and services, provide a strong foundation for future success and value creation for shareholders and stakeholders.