BAE Systems’ war dividend has already paid off
The author is a Reuters Breakingviews columnist. The opinions expressed are their own. Refiles to remove extraneous word in first paragraph.
MILAN, Feb 21 (Reuters Breakingviews) -BAE Systems BAES.L has had another good year but investors already knew that. In 2024, sales at the British defence firm grew 9% year-on-year to 25.3 billion pounds while underlying earnings per share rose 14% to 63.2 pence. More notably, CEO Charles Woodburn reported a record 38 billion pounds order intake, as conflicts in Ukraine and the Middle East push governments around the world to buy weapons. The latest intake lifted BAE Systems’ overall backlog to an all-time high of 70 billion pounds. Shares had risen to record highs in the run-up to the announcement but fell 3% after the results.
That may be due to the more modest 6% to 8% growth in earnings per share the $46 billion company is predicting for this year. At 1,212 pence, shares on Wednesday are trading at around 18 times the top end of BAE Systems’ earnings guidance for 2024, Breakingviews calculations show. This is slightly below the average multiple for top European defence competitors of around 20 times, per LSEG data, suggesting a possible upside of 10%, especially if escalating geopolitical tensions push politicians to stock up even more on defence systems. Yet shares in BAE Systems, which is a key supplier of Eurofighter Typhoon jets, have rallied more than 100% since Russia’s invasion of Ukraine two years ago to a record high earlier this week. Even if BAE is unable to close its valuation gap with peers, investors have already cashed in on a sizeable war dividend. (By Lisa Jucca)
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BAE Systems shares have rallied since the Ukraine war https://reut.rs/3SJKdWx
Editing by Francesco Guerrera and Streisand Neto
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