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A rather upbeat trading statement Nov. 15 from BAE Systems as the group maintains guidance and hinted at upgrades to medium-term guidance. We maintain our GBX 700 fair value estimate and believe shares are slightly overvalued. The stock does offer a reliable and growing gross dividend yield of 3.4% at current levels.
BAE Systems is a British global defense company. BAE has a dominant position in the U.K., is a top-six supplier to the U.S. Department of Defense, and has a strong presence in key defense markets (eg. Saudi Arabia and Australia). Exposure to programmes is well diversified. BAE derives 45% of sales from services and support and 35% from major programmes such as the F-35 Lightning II and Eurofighter Typhoon fighter jets. The balance of sales is derived from electronic systems and cyber intelligence.
