Britain’s most prominent defense company BAE Systems, upgraded its earnings guidance for 2023 to the growth of 10%-12%, saying increased global uncertainty had driven military equipment orders to a record level. Shares in the company jumped 4.9% to 979 pence at 0916 GMT, making them the most significant contributor to the FTSE 100’s early rise. The stock has risen 19% over the last 12 months. BAE said strong operational performance plus the demand from its customers – the biggest in order of size are the United States, Britain, Saudi Arabia, and Australia – meant its full-year results would be better than expected across all divisions.
BAE has a large order backlog, which it expects to grow at a mid-teens rate this year. A large chunk of this is from orders for its Type 26 frigates and UK dreadnought submarine program, but it also includes contracts for missiles and the BAE-MBDA joint venture developing Europe’s newest fighter jet, the Typhoon.
The Ukraine war has boosted defense spending globally, and many NATO nations are rebuilding their stocks of weapons, equipment, and ammunition to cope with Russia’s aggression in the country. The higher sales forecast means BAE, one of the largest suppliers to the US Pentagon, can raise its dividend to shareholders for the 19th consecutive year.
BAE, which makes aircraft, fighter jets, military ships, and submarines, boosted its operating profit from PS525 million to PS1.4 billion from six months to June. It also lifted its full-year profit outlook, raising its forecasts for the second time in two years, and raised its annual dividend by 7.6%.
The company is one of the world’s biggest defense contractors and has a presence in the UK, North America, Europe, Asia Pacific, and Latin America. Its primary businesses include air, land, and maritime defense, advanced electronics, security and information technology solutions, and support services.
Its most significant products are nuclear-powered submarines, the Typhoon fighter jet, the Panavia Tornado attack aircraft, and the Beowulf unarmoured all-terrain vehicle. BAE Systems is also building a series of new frigates for the Royal Navy and the Royal Australian Navy, and the Astute-class nuclear submarines for both countries. It also supplies electronic warfare equipment and weapons for the US Navy’s F-35 fighter aircraft and makes the UK version of the Armoured Personnel Carrier.
BAE has diverse customers, with 65% of its revenue coming from outside the UK. The most important markets are the US, where it is a top supplier to the Pentagon, Britain, and Germany. It also has a significant presence in Saudi Arabia, where it has recently won several major defense contracts.
Its most profitable division is its aerospace business, which makes aircraft and spacecraft systems. This division has reported profits for the past three financial years and has more than $36 billion market capitalization. BAE also has several joint ventures and partnerships with companies such as Embraer.
