BAE Systems improves outlook as war in Ukraine increases defense spending

  • EPS expected to rise 11-13% this year, helped by a strong dollar and buybacks
  • Previous forecast for EPS up 4-6% at constant currencies
  • Guides for more growth and margin expansion in 2023
  • Announces 4.2 billion stg combat ship contract with UK
  • Shares rise 3%

LONDON, Nov 15 (Reuters) – Britain’s biggest defense contractor, BAE Systems (BAES.L)raised its profit forecast on Tuesday after announcing “very strong” orders for 2022, and forecast stronger growth next year as the war in Ukraine boosts military spending.

The new orders include a 4.2 billion pound ($4.97 billion) contract announced by Britain on Tuesday for BAE Systems to build five ships for the Royal Navy.

The maker of submarines, fighter jets and combat vehicles said the strengthening US dollar this year and a buyback of the company’s shares would help boost underlying earnings per share (EPS) by 11 % to 13% for 2022.

Previous forecasts at constant exchange rates called for EPS growth of 4% to 6% this year.

The war in Ukraine has boosted defense spending globally and BAE said that despite deteriorating economic conditions, the commitment to defense in its main markets of the United States, Britain , Saudi Arabia and Australia remained strong.

It forecasts another year of revenue growth and margin expansion in 2023.

“We see sales growth from all segments and opportunities to further improve the medium-term outlook as our customers navigate the elevated threat environment,” Chief Executive Charles Woodburn said in a statement on Tuesday. .

BAE shares rose 3% to 748 pence in early morning trading. The stock is up 36% year-to-date, outperforming the UK blue chip index (.FTSE) which is flat.

Britain, BAE’s second largest market by sales behind the United States, has pledged to increase defense spending to 3% of GDP by 2030, but a deterioration in national finances has led to speculation over the fact that the target could be deleted in a budget statement due Thursday. .

Earlier on Tuesday, Britain confirmed a long-planned order for Type 26 anti-submarine warfare vessels, a deal worth £4.2 billion from BAE, supporting the facilities of shipbuilding in Scotland into the 2030s and over 4,000 jobs across the UK.

Jefferies analysts said the updated forecast was 1% above consensus.

“Operating feedback is strong, indicating strong execution and easing social tensions,” they said.

($1 = 0.8455 pounds)

Reporting by Sarah Young; edited by James Davey and Susan Fenton

Our standards: The Thomson Reuters Trust Principles.


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