BAE share price falls as full-year earnings inch lower

Shares in BAE Systems Plc (LON:BA) have lost ground in early morning trading with the company posting a drop in full-year revenue and underlying earnings. The blue-chip contractor, however, forecast slightly better earnings this year.

As of 08:49 GMT, BAE’s share price had lost 1.44 percent to stand at 514.50p, underperforming the benchmark FTSE 100 index which has declined 0.44 percent to 6,867.98 points. The defence contractor’s shares have gained some 16 percent over the past year.
BAE announced in a statement this morning that its underlying earnings before interest, taxes and amortisation (EBITA) had declined to £1.7 billion in 2014, from £1.93 billion a year ago, while sales had fallen to £16.64 billion, as compared with £18.18 billion in 2013. The group’s operating profit, however, rose to £1.3 billion from £806 million. The FTSE 100 company today recommended a final dividend of 12.3p per share, bringing the total dividend for the year to 20.5p per share, and marking a two-percent increase over 2013.

BAE Systems’ profits have been hit in recent years by cuts to defence budgets in the UK and US, the group’s biggest markets. The company, however, forecast that its underlying earnings per share would be marginally higher this year, taking into account some anticipated naval and aircraft orders.
The group’s chief executive Ian Kong commented that BAE would benefit from long-term contracts in the UK, “notwithstanding continued pressure on public spending”.

“We believe US budgets are now relatively stable, with some early indications of a modest improvement in 2016,” he added.
According to the Financial Times, as of February 14, the consensus forecast amongst 31 polled investment analysts covering BAE has it that investors should hold their position in the company.The 20 analysts offering 12-month price targets for the blue-chip defence contractor have a median target of 508.50p, with a high estimate of 585.00p and a low of 370.00p.
As of 09:56 GMT, Thursday, 19 February, BAE Systems plc share price is 518.00p.