BAE Systems share price steady amid tax update

on Jul 18, 2019
Updated: Sep 16, 2019
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BAE Systems’ (LON:BA) share price has climbed marginally higher in London in today’s session as the defence contractor signalled a one-off tax-related non-cash benefit. The update comes ahead of the blue-chip group’s upcoming half-year update due on July 31.

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As of 10:08 BST, BAE Systems’ share price had inched 0.04 percent higher to 518.80p, outperforming the broader UK market, with the benchmark FTSE 100 index having slipped into the red and currently standing 0.54 percent lower at 7,494.56 points. The group’s shares have given up more than 23 percent of their value over the past year, as compared with about a 2.5-percent fall in the Footsie.

Tax-related non-cash benefit

BAE Systems announced in a statement this morning that  following agreements over overseas tax matters a one-off non-cash benefit has been recognised to its earnings per share for 2019. In addition, following review of an EU Commission decision which concluded that the UK’s Controlled Foreign Company regime partially represents State Aid, the group has recognised a provision for the estimated exposure.

BAE Systems said that a net earnings per share benefit of circa 5p would arise as a result, in addition to its  current 2019 underlying earnings per share guidance. The company, however, noted that these items were not expected to materially impact its underlying tax rate in future years.

Analysts on defence contractor

Barclays reaffirmed the FTSE 100 company as an ‘equal weight’ today, without specifying a target on the BAE Systems share price, while, JPMorgan Chase & Co reaffirmed the defence contractor as a ‘neutral’ yesterday, with a valuation of 530p on the stock. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating and an average price target of 608p.

In February, BAE Systems reported that its underlying EBITA had decreased by £46 million to £1.93 billion last year, while underlying earnings per share came in two percent higher at 42.9p.

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