BAE Systems raises forecasts due to increased military spending.

BAE Systems raises forecasts due to increased military spending.

BAE Systems Upgrades Guidance for 2023, Anticipating Strong Growth

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LONDON, Aug 2 – In an increasingly uncertain world, BAE Systems, Britain’s largest defense company, has announced an upgrade to its guidance for 2023. The company anticipates annual earnings growth of 10% to 12% as governments around the globe ramp up spending on military equipment[^1^].

BAE Systems, with a strong presence in the United States, Britain, Saudi Arabia, and Australia, reported that its operational performance and increasing demand from customers have contributed to better-than-expected full-year results across the board. Share prices in BAE Systems surged 5% in early trading, marking a 19% increase over the past year[^1^].

The surge in demand for weapons, ammunition, and equipment can be attributed to multiple factors. Firstly, following Russia’s invasion of Ukraine, western allies have shown substantial support for Ukraine and have increased their own stockpiles as a form of deterrence[^1^]. Secondly, growing threats in the Asia-Pacific region have compelled countries to bolster their defense capabilities[^1^].

BAE Systems is expecting substantial growth in 2023, with the company stating that earnings per share are set to increase by 10% to 12%, a significant upgrade compared to the earlier forecast of 5% to 7% in February. Moreover, sales guidance has been revised to 5% to 7% growth, compared to the initial forecast of 3% to 5%[^1^].

Commenting on the positive outlook, BAE Systems CEO Charles Woodburn stated, “Our global footprint, deep customer relationships, and leading technologies enable us to effectively support the national security requirements and multi-domain ambitions of our government customers.” Woodburn also emphasized the company’s solid performance and its ability to sustain growth in the coming years, citing a record order backlog of £66.2 billion ($84.5 billion)[^1^].

Hargreaves Lansdown Analyst Aarin Chiekrie highlighted the promising prospects for BAE Systems, noting that the UK, US, and Europe, BAE’s largest clients, are expected to continue increasing defense budgets. Chiekrie added, “With some of its biggest buyers…the sky really is the limit”[^1^].

In the first half of the year, BAE Systems reported a 17% increase in underlying earnings per share, reaching 29.6 pence. The company also approved an 11% increase in its interim dividend, amounting to 11.5 pence per share. Additionally, BAE Systems announced a share buyback program of up to £1.5 billion[^1^].

During this period, BAE Systems secured significant contracts, including a contract from the Czech Republic for 246 infantry fighting vehicles and a contract from Poland for the supply of launchers and missiles through its MBDA unit. Furthermore, the company’s projects to construct new Dreadnought submarines for Britain and supply Typhoon jets to Qatar remain ongoing[^1^].

In conclusion, BAE Systems’ upgraded guidance for 2023 reflects the growing demand for military equipment in an uncertain world. With a strong international presence and a solid order backlog, the defense company is well-positioned to achieve sustained growth in the coming years. The positive outlook is driven by increased defense spending in key markets, such as the UK, US, and Europe, as well as growing threats in the Asia-Pacific region. BAE Systems continues to be a key player in the defense industry, providing submarines, fighter jets, ships, combat vehicles, and other essential equipment[^1^].


References:

[^1^] Reuters. “BAE Systems raises 2023 guidance as global tensions fuel demand”. August 02, 2023. Link