BAE Systems orders rise to £25bn for global military spending

BAE Systems shares rose on Tuesday as the defense giant’s order book continues to grow due to a global military spending boom.

The FTSE 100 company has won orders worth £25 billion this financial year, up from £15 billion just six months ago, and puts BAE on course to meet full-year targets, with 90 percent of expected sales for 2024 is already covered.

BAE shares have risen more than 115 percent since Russian tanks entered Ukraine on February 24, 2022, but reports in September that NATO allies began discussing a negotiated ceasefire put a damper on investor enthusiasm.

But more recent reports suggest an impending renewal of European defense spending following the election of Donald Trump in the US.

And BAE Systems on Tuesday maintained improved expectations for the year of a 12 to 14 percent increase in sales and underlying operating profit.

It said the “strong visibility” of its order book and “pipeline of established positions” support its long-term growth prospects.

It highlighted notable contract awards in the second half of the year, including a $493 million deal to continue production of self-propelled howitzers and ammunition carriers

BAE also received a boost from the integration of its Space & Mission Systems business, with sales “accelerating in the second half of the year against the group’s growing margins.”

CEO Charles Woodburn said: “By focusing on operational excellence, contract discipline and workforce growth, we can consistently deliver critical capabilities and technologies to our customers around the world.

“At the same time, we continue to invest in our business for the long term, which, together with our broad geographic and domain diversity, positions us well for further growth in the coming years.”

BAE Systems shares rose 1 percent to 1,408 cents, after a rise of 26.3 percent since the start of the year.

Jarek Pominkiewicz, industry analyst at Quilter Cheviot, said: “As the UK government ramps up defense spending and global initiatives such as the UK-Italy-Japan fighter jet program continue to gain traction, BAE is poised to benefit from an industry-wide tailwind.

‘The backdrop is only made stronger by growing calls for European and Asian allies to increase their own military investments.

‘In terms of valuation, BAE shares may look expensive compared to historical averages, but they remain competitive with US defense peers.

‘The stock is currently trading at levels that reflect both current strength and future growth prospects, although it is worth noting that BAE has also outperformed its sector, with a 9 per cent gain since the summer.’