BAE Systems orders soar to £25bn on international navy spending spree

BAE Systems shares rose on Tuesday as the defence giant’s order book continues to swell on the back of a global military spending boom.

The FTSE 100 firm has secured orders worth £25billion this financial year, up from £15billion just six months ago and puts BAE on target to hit full-year goals, with 90 per cent of projected revenues for 2024 already covered.

BAE shares have added more than 115 per cent since Russian tanks rolled into Ukraine on 24 February 2022, but September reports that NATO allies were starting to talk about a negotiated ceasefire put a dampener on investor enthusiasm.

But more recent reports suggest a looming renewal of European defence spending following the election of Donald Trump in the US.

And BAE systems on Tuesday stuck to upgraded guidance for the year of a 12 to 14 per cent jump in revenue and underlying operating profit.

It said the ‘strong visibility’ of its order backlog and ‘pipeline of incumbent positions’ supports its long-term growth outlook.

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

BAE was also boosted by the integration of its Space & Mission Systems business, with sales ‘accelerating in the second half of the year at group accretive margins’.

Chief executive Charles Woodburn said: ‘Focusing on operational excellence, contracting discipline and growing our workforce is enabling us to consistently deliver critical capabilities and technologies for our customers worldwide.

‘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 continued growth in the years ahead.’

BAE Systems shares were up 1 per cent to 1,408p, having added 26.3 per cent since the start o the year.

Jarek Pominkiewicz, industrials analyst at Quilter Cheviot, said: ‘With the UK government ramping up its defence spending and global initiatives like the UK-Italy-Japan fighter jet program gaining 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’s shares may look expensive compared to historical averages, but they remain competitive against US defence peers.

‘The stock is currently trading at a level that reflects both its current strength and future growth prospects, though it’s worth noting that BAE has also outperformed its sector, delivering a 9 per cent gain since the summer.’