BAE share price rises on US budget accord

on Dec 11, 2013
Updated: Oct 21, 2019
Listen, Wednesday, December 11: Shares in BAE Systems Plc (LON:BA) have gained today with analysts and investors attributing the advance to greater predictability of US military spending following a bipartisan budget deal in Washington that provides $31.5 billion (£19.2 billlion) of relief from forced cuts in the country’s defence budget. The accord reached by US Congressional negotiators late yesterday will end three years of fiscal instability that culminated in October with a partial government shutdown.

BAE’s share price has risen as much as three percent today, making the British defence contractor the top gainer on the benchmark FTSE 100 equity index.
Two days ago BAE Systems said it had been selected by the US Army to provide a range of services to support space and missile defence as part of a contract worth as much as $220 million (£134 million) over three years. Under the contract, BAE Systems will bid on task orders with four other companies to support various missions of the Army Space and Missile Defense Command (SMDC) and the Army Forces Strategic Command.

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Tom White, senior director of Mission Support Solutions at BAE Systems, said in a statement that by winning the new contract the British aerospace and defence group builds on its long-standing relationship with SMDC. “The work will also position us for additional growth in the military space market,” he said.
Since 2006, BAE Systems has performed development and integration of electronic systems for surveillance and reconnaissance missions for SMDC under another contract.

**Pentagon approves deal for BAE upgrade of F-16 jets for South Korea**
The Pentagon has approved a deal under which BAE Systems will upgrade 134 older F-16 fighter jets for South Korea, the Defense Security Cooperation Agency (DSCA) notified Congress last month.

BAE beat F-16 manufacturer Lockheed Martin Corp to win the race for the South Korean deal last year. The first phase of the deal is valued at $200 million (£122 million), and covers initial design and development efforts, according to the DSCA, the Pentagon’s arm overseeing foreign military sales.According to South Korean media reports, work on the second phase, which will upgrade the F-16 C- and D-model jets with new avionics and radars, could bring the total value of the deal to about $1.1 billion (£670 million).

BAE hailed the announcement by the DSCA, saying the notification of Congress marked a big step forward in the plan agreed by South Korea and the US Air Force for BAE Systems to carry out the F-16 upgrades.
According to Loren Thompson, chief operating officer of US-based think-tank Lexington Institute, the deal opens the door to similar deals for BAE Systems in a dozen other countries in coming years.
Historically, the companies that manufacture combat aircraft have also serviced them and carried out major upgrades but given the dearth of major new acquisition programs, defence contractors are fighting hard for all new orders, including deals for upgrades of existing systems. Because the F-16 is the most widely installed fighter in the world, the sustainment of that fleet over the next 20 years is a multibillion dollar opportunity, Thompson opined.
**As of 13:46 UTC buy BAE shares at 425.40p**
**As of 13:46 UTC sell BAE shares at 425.10p**
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