BAE shares slip despite guidance upgrade
BAE shares slipped in early morning trade on Wednesday despite Britain’s biggest defence business upgraded its earnings guidance.
The FTSE 100 firm increased its full year sales forecasts to growth of 8-10 per cent, up from 7-9 per cent, with underlying pre-tax earnings set to grow 9-11 per cent, up from 8-10 per cent.
However, order intake of £13.2bn dipped from last year’s highs of £15.1bn, while free cash flow fell sharply from £219m to -£368m.
BAE Systems shares declined 2.1 per cent to 1,783p.
Despite this morning’s dip, BAE’s stock has risen by around 60 per cent since the start of the year, adding tens of billions of pounds to its market cap and making it one of the best-performing European large-cap stocks, amid growing expectations of a ramping up in defence expenditure across the continent.
The stock’s performance has helped push the FTSE 100 up to a new record of 9,000. The UK’s premiere index is up more than 10 per cent since the beginning of 2025, outperforming the US S&P 500 index, which is up 8.5 per cent.
BAE’s FTSE rival Babcock has performed even better, with the stock more than doubling in value in just six months.
Hiring surge incoming
Adam Vettese, market analyst for eToro, said: “These results highlight BAE’s discipline, portfolio strength, and prominent position as one of the chief beneficiaries of the new defence spending cycle.
“Investor enthusiasm is supported by the sector-wide momentum and BAE’s proactive investment in high end technologies, infrastructure, and talent.
“Still, investors should monitor cash conversion, integration of new businesses, and the return to stronger free cash generation.”
In May, BAE Systems said it planned to hire thousands more staff as the company prepares for an increase in global defence spending.
The British defence business said it was building on its more than £1bn capex splurge in 2024 to increase capacity for the future.
This includes work on a new explosives filling facility in South Wales, a new shipbuilding assembly hall in Glasgow, and a modern ship lift and land-level repair complex in Florida, some of which have already become operational.
BAE shrugged off concerns over US tariffs, insisting trading was set to continue in line with management’s expectations, adding that its US production facilities meant that its US operations are produced with a “largely domestic” supply chain.