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BAE Systems
(LSE:BA)
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Rating:73Outperform
Price Target:
2,099.00 p
▲(0.05% Upside)
Action:Upgraded
Date:07/31/26
The score is driven primarily by solid underlying financial performance (steady growth and strong free cash flow) and a very positive earnings update with upgraded guidance and record backlog. These strengths are partly tempered by margin volatility and higher leverage in the financial statements, a relatively expensive P/E with only a modest dividend yield, and only moderately supportive technicals based on available moving averages.
Positive Factors
Record backlog and long-term visibility
The record backlog and extensive pipeline provide substantial revenue visibility across long-duration defence programs. This supports more predictable planning, sustains production and service opportunities, and creates a durable platform for growth as allied defence procurement expands.
Negative Factors
Maritime margin pressure
Low margins on major first-in-class maritime programs can weigh on group profitability while these platforms move through early execution stages. Although management expects improvement, prolonged delivery complexity or cost pressure could delay margin recovery and dilute benefits from stronger demand.
Read all positive and negative factors
Positive Factors
Negative Factors
Record backlog and long-term visibility
The record backlog and extensive pipeline provide substantial revenue visibility across long-duration defence programs. This supports more predictable planning, sustains production and service opportunities, and creates a durable platform for growth as allied defence procurement expands.
Read all positive factors
BAE Systems (BA) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£56.96B
Dividend Yield1.96%
Average Volume (3M)5.14M
Price to Earnings (P/E)27.6
Beta (1Y)0.98
Revenue Growth7.20%
EPS Growth8.54%
CountryUK
Employees104,000
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.70
Shares Outstanding2,999,401,100
10 Day Avg. Volume4,082,588
30 Day Avg. Volume5,140,745
Financial Highlights & Ratios
PEG Ratio4.04
Price to Book (P/B)4.36
Price to Sales (P/S)1.81
P/FCF Ratio21.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£2,311.25Price Target Upside10.16% Upside
Rating ConsensusHold
Number of Analyst Covering4
EPS Forecast (FY)0.84
Revenue Forecast (FY)£33.15B
BAE Systems Business Overview & Revenue Model
Company Description
BAE Systems plc, established in 1970 and headquartered in Farnborough, United Kingdom, is a global leader in providing advanced defense, aerospace, and security solutions. The company's comprehensive operations are divided into five distinct busin...
How the Company Makes Money
BAE Systems primarily makes money by selling defence products and delivering services under long-term contracts, predominantly to national governments and government agencies (e.g., ministries/departments of defence) and, to a lesser extent, throu...
BAE Systems Earnings Call Summary
Earnings Call Date:Jul 30, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Feb 25, 2027
Earnings Call Sentiment Positive
The call presents a strongly positive operational and financial picture: double-digit profit and EPS growth, record order intake and backlog, substantial cash generation and upgraded full-year guidance. Strategic investments (MBDA capacity uplift, US munitions and space ramp, production expansions in Hägglunds/Bofors) and a large pipeline underpin long-term visibility. Key negatives are concentrated in maritime (first-in-class margin pressure), timing uncertainty around customer advances and execution/competitive risks in fast-moving markets. On balance, the upbeat financial momentum, record backlog and upgraded guidance substantially outweigh the headwinds.Positive Updates
Strong H1 Financial Performance
Sales grew 9% (constant currency), EBIT increased 11%, and earnings per share rose 13% versus H1 2025. Return on sales improved 20 basis points to 10.8%.
Negative Updates
Maritime Margin Headwinds (First-in-Class)
Maritime return on sales remains low at 6.1% in H1 due to early-stage, first-in-class programs (Type 26, Hunter, Dreadnought) trading at relatively low margins. Management expects improvement over time but H1 margins weighed on group results.
Read all updates
Q2-2026 Updates
Positive
Negative
Strong H1 Financial Performance
Sales grew 9% (constant currency), EBIT increased 11%, and earnings per share rose 13% versus H1 2025. Return on sales improved 20 basis points to 10.8%.
Read all positive updates
Company Guidance
Management upgraded full‑year guidance: sales now expected to grow 8–10% (up 100bp), EBIT 10–12% (up 100bp) and EPS 11–13% (up 200bp), with free cash flow expected to exceed £2.0bn (excluding any further material advances, including unwind of existing advances). The upgrade follows a strong H1: sales +9% CC, EBIT +11% to £1.7bn (return on sales 10.8%), EPS +13%, order intake £16.4bn, backlog £84bn (and ~£260bn of backlog/incumbent positions, ~8x annual sales), operating cash flow £2.1bn (including £1.6bn of customer advances), H1 free cash flow £1.8bn, CapEx £400m, interest expense £187m and net debt down to £3.2bn; the company also raised its 2024–26 cash target by £700m to now expect to exceed £6.7bn and points to a ~£180bn pipeline underpinning future growth.BAE Systems Financial Statement Overview
Summary
Income Statement
76
Positive
Balance Sheet
68
Positive
Cash Flow
72
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 29.38B | 28.34B | 26.31B | 23.08B | 21.26B | 19.52B |
| Gross Profit | 7.64B | 7.48B | 6.89B | 15.10B | 5.91B | 5.19B |
| EBITDA | 3.84B | 3.77B | 3.97B | 3.45B | 2.81B | 2.91B |
| Net Income | 2.11B | 2.06B | 1.96B | 1.86B | 1.59B | 1.76B |
Balance Sheet | ||||||
| Total Assets | 39.89B | 37.68B | 38.14B | 32.06B | 31.46B | 27.14B |
| Cash, Cash Equivalents and Short-Term Investments | 4.36B | 3.62B | 3.38B | 4.11B | 3.36B | 3.11B |
| Total Debt | 9.15B | 9.05B | 10.15B | 6.48B | 6.86B | 6.36B |
| Total Liabilities | 27.35B | 25.74B | 26.36B | 21.34B | 19.06B | 18.66B |
| Stockholders Equity | 12.38B | 11.78B | 11.62B | 10.56B | 11.21B | 7.44B |
Cash Flow | ||||||
| Free Cash Flow | 4.52B | 2.38B | 2.76B | 2.80B | 2.00B | 1.82B |
| Operating Cash Flow | 5.42B | 3.30B | 3.92B | 3.76B | 2.70B | 2.28B |
| Investing Cash Flow | -967.00M | -919.00M | -5.27B | -541.00M | -548.00M | -14.00M |
| Financing Cash Flow | -2.44B | -2.26B | 695.00M | -2.19B | -2.06B | -1.99B |
BAE Systems Technical Analysis
Negative
2098.00
Price Trends
2002.72
Negative
1973.98
Negative
2020.64
Negative
Market Momentum
-14.68
Negative
48.71
Neutral
72.39
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:BA, the sentiment is Negative. The current price of 2098 is above the 20-day moving average (MA) of 1920.08, above the 50-day MA of 2002.72, and above the 200-day MA of 2020.64, indicating a neutral trend. The MACD of -14.68 indicates Negative momentum. The RSI at 48.71 is Neutral, neither overbought nor oversold. The STOCH value of 72.39 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GB:BA.
BAE Systems Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | £56.96B | 27.61 | 17.49% | 1.96% | 7.20% | 8.54% | |
70 Outperform | £109.59B | 36.87 | 108.91% | 0.83% | 18.56% | -47.18% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
62 Neutral | £2.45B | 24.31 | 19.34% | 2.28% | -0.47% | ― | |
61 Neutral | £4.61B | 22.24 | 31.57% | 0.79% | 7.17% | -14.18% | |
61 Neutral | £7.31B | 4.25 | 92.97% | 2.31% | -33.55% | 4.29% | |
59 Neutral | £1.45B | 43.95 | 9.03% | 1.51% | -3.99% | -22.35% |
* Industrials Sector Average
GB:BA
BAE Systems
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5.09%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.