BAE Systems share price surges as group flags rise in earnings

on Feb 23, 2017
Updated: Oct 21, 2019

Shares in BAE Systems (LON:BA) have gained ground in London in today’s session, as the defence contractor forecast earnings growth this year, amid prospects for a rise in military spending in the US, one of the group’s key markets. The FTSE 100 group further delivered higher revenues and profits for 2016.

As of 14:16 GMT, BAE Systems’ share price had added 0.94 percent to 611.16p, outperforming the broader market, with the benchmark FTSE 100 index currently 0.07 percent better off at 7,307.01 points. The group’s shares have gained more than 20 percent over the past year, and are up by nearly four percent in the year-to-date.
BAE Systems announced in a statement today that its underlying earnings per share before interest, taxes, and amortisation (EBITA) had climbed to £1.9 billion last year, from £1.7 billion in the prior-year period. The group’s sales meanwhile rose to £19 billion from £17.9 billion in 2015.

“2016 was a good year for BAE Systems. Our strategy is well defined; we have a large order backlog, long-term programme positions, strong programme execution and a well-balanced portfolio,” the group’s outgoing chief executive Ian King commented in the statement. “With an improved outlook for defence budgets in a number of our markets, we are well placed to continue to generate attractive returns for shareholders.”

BAE Systems expects underlying earnings per share to be between five percent and 10 percent 2016’s 40.3p. The company further noted that the defence market outlook in the US was improving with encouraging signs of a return to growth in defence budgets.
Reuters quoted Jefferies analyst Sandy Morris as saying that the group would benefit from higher US spending on operational readiness once the new administration authorised the full-year 2017 defence budget.
BAE’s results come after the defence giant confirmed yesterday that its chief operating officer Charles Woodburn will take the top job at the company as King prepares to retire on June 30.
Andy Chambers, analyst at Edison Investment Research, told City A.M. that King leaves BAE in a healthy condition, and shareholders should be grateful to him.
“The dividend has continued to grow, notwithstanding the pension deficit concerns, and the share price is up by 25 per cent from the starting point and has more than doubled from the lows in 2011,” the analyst pointed out. “With defence spending now on the rise the share price is at its high for the 21st century. Now if only the discount rate would rise, even the pension accounting deficit might become less onerous.”
As of 14:45 GMT, Thursday, 23 February, BAE Systems plc share price is 610.50p.

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