Shares in BAE Systems (BA.) soared 4% to £21.03 after the defence group delivered record sales and better-than-expected earnings for 2025.
| Share price: £21.03 (+4%) | PE: 25.8x |
| Market cap: £60.4bn | Yield: 2% |
Europe’s biggest defence contractor is profiting from a ramp-up in global defence spending amid rising geopolitical tensions. Notably, Europe is rearming itself in response to Russia’s invasion of Ukraine.
Forecast-beating earnings
The aerospace, arms and IT security company posted forecast-beating underlying earnings before interest and tax (EBIT) of over £3.3 billion for 2025. That was up 12% on 2024.
Sales surged 10% to a record £30.7 billion with BAE seeing growth in all sectors.
The aerospace and weapons manufacturer’s order backlog hit a record £83.6 billion as of the end of December, boosted by a bumper £36.8 billion of orders during the year.
What did the CEO say?
CEO Charles Woodburn said the results highlight ‘another year of strong operational and financial performance’.
And in ‘a new era of defence spending, driven by escalating security challenges’, he believes BAE is well positioned to provide ‘both the advanced conventional systems and disruptive technologies needed to protect the nations we serve now and into the future.’
Solid guidance
BAE, which bagged a £4.6 billion Typhoon aircraft order from Turkey and a Type 26 frigates order from Norway last year, forecast further growth in 2026, albeit at a slower pace.
The FTSE 100 firm guided for underlying earnings growth of between 9% to 11% and sales growth in the 7% to 9% range.
BAE Systems’ shares are testing new all-time highs and aren’t cheap as a result, swapping hands for almost 26 times forward earnings.
However, free cash flow and dividend growth are strong. And we think the stock can continue to rise with a new era of defence spending set to drive growth for years to come.
Read the press release here: https://investors.baesystems.com/regulatory-news
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