Key Takeaways:
- H1 underlying EBIT rose 11% to £1.7 billion, beating consensus
- Full-year guidance raised across sales, profit, and cash flow
- Record order backlog of £84 billion signals sustained demand
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BAE Systems raises guidance 10% as H1 profit climbs on defense spending
BAE Systems PLC (LSE:BA.) reported a 9% rise in first-half sales to £15.77 billion and upgraded its full-year guidance across all key financial measures as governments boosted defense spending amid rising geopolitical tensions.
"The global threat picture remains highly volatile and governments are responding with sustained increases in their defense budgets," Chief Executive Charles Woodburn said.
Underlying earnings before interest and taxes rose 11% to £1.70 billion, beating the consensus estimate of £1.66 billion, according to a market consensus provided by the company. Underlying earnings per share climbed 13% to 38.9 pence, above the 37.3 pence analysts had forecast. Free cash flow swung to an inflow of £1.79 billion from an outflow of £368 million a year earlier, driven by a high level of customer advances.
The UK arms maker now expects full-year sales growth of 8% to 10%, up from a prior forecast of 7% to 9%. Underlying EBIT is seen rising 10% to 12%, compared with previous guidance of 9% to 11%, while underlying EPS growth is expected at 11% to 13%, versus an earlier range of 9% to 11%. The free cash flow target was lifted to more than £2 billion from more than £1.3 billion, and the cumulative FCF target for 2024 through 2026 was raised to more than £6.7 billion from more than £6 billion.
Order intake reached £16.4 billion in the period, up from £13.2 billion a year ago, lifting the company's backlog to a record £84 billion. BAE secured a £5.9 billion contract to progress the UK's Dreadnought Class nuclear deterrent submarines and signed a seven-year framework agreement with the US Department of War to quadruple production of the infrared seeker for the THAAD interceptor missile. The board declared an interim dividend of 15 pence, up 11%, payable on Dec. 2.
The guidance raise signals management expects defense demand to accelerate as European governments replenish stockpiles and the US expands munitions production. Investors will watch the full-year results for further margin expansion as BAE invests in new facilities in Texas, New Hampshire, and Sweden to boost capacity.
This article is for informational purposes only and does not constitute investment advice.
[1] BAE Systems sets sights on higher profits as defence spending rises[2] BAE Systems upgrades full-year guidance as H1 profit rises[3] BAE Systems upgrades guidance after strong first half[4] BAE Systems Lifts Guidance As Defense Spending Booms[5] BAE Systems Lifts Guidance As Defense Spending Booms — Update
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