- Strong order intake maintained with circa £10 billion booked
- Share buyback programme ongoing
- Share price up 80% since February 2022
As governments struggle to quell conflicts around the globe, defence spending looks a safe bet, and BAE Systems (BA.) is winning contracts in this perilous climate.
The defence firm flagged order intake worth more than £30 billion booked year-to-date, so while the share price was somewhat muted in morning trading, word that trading had been in line with the upgraded guidance issued at the time of their 2023 half year results in August is welcome.
Back then BAE said earnings per share would grow by around 10% to 12% in 2023.
Russ Mould investment director at AJ Bell said the defence giant’s performance was lifted by ‘greater geopolitical instability’ which ‘continues to drive orders and BAE’s share price, which is up more than 80% since the Russian invasion of Ukraine in February 2022.
‘With the emergence of a new conflict in Gaza, global governments are facing ever greater pressure to invest in their defence capabilities at a level which they probably haven’t faced since the end of the Cold War.’
New initiatives like the joint Aukus submarine project, on which BAE has a meaningful position, are reflective of this situation.
The encouraging thing for BAE and its shareholders is that the contracts it is winning tend to be long-term in nature and, as a result, the company has good visibility on revenue, earnings and cash flow over several years.
ON TRACK
Back in August the defence firm announced it was buying US spacecraft company Ball Aerospace for $5.6 billion, the company said this was ‘progressing well and we continue to target a completion date in the first half of 2024.’
BAE Systems makes foray into space with $5.6 billion Ball Aerospace buy
BAE maintained its 2023 interim dividend of 11.5 pence per share which will be paid on 30 November 2023.
Total cash returned to shareholders – including the 2022 final dividend - is expected to be circa £1.4 billion.
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DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Steven Frazer) own shares in AJ Bell.
