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BAE Systems PLC - Stock Quote BA.

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Morningstar's BAE Systems PLC Stock Analysis

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BAE Systems Is Well Positioned to Benefit From Rising Defense Budgets; Increase in FVE

Joachim Kotze, CFA Equity Analyst

Analyst Note

| Joachim Kotze, CFA |

Wide-moat BAE Systems is trading in line with expectations and reconfirmed full-year guidance despite supply chain and staffing challenges. The group believes it has the necessary levers at its disposal to offset short-term headwinds. Looking further out, the company seems confident that it will benefit from higher defense spending as a result of rising global threats spurred by the Ukraine war. As a result, we increase our fair value estimate by 17% to GBX 700 (ADR: USD 35) to account for higher top-line growth. We increase revenue growth in the later years of our forecasts, as lead times on contract tenders and production tend to be long, especially given BAE’s high share of long-cycle programs. The lower pension deficit due to excess contributions and rising rates also contributed to the increase in fair value.

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BAE Systems PLC's Company Profile

Business Description

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.

6 Carlton Gardens
London, SW1Y 5AD, United Kingdom
T +44 1252373232
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings
Fiscal Year End Dec 31, 2022
Stock Type
Employees 82,000