BAE Systems (BAES.L) has concluded another successful year, although this outcome didn’t come as a surprise to investors.
In 2024, the British defence firm witnessed a 9% year-on-year growth in sales, reaching 25.3 billion pounds, alongside a 14% rise in underlying earnings per share to 63.2 pence.
CEO Charles Woodburn highlighted a remarkable achievement with a record order intake of 38 billion pounds, largely attributed to heightened conflicts in regions like Ukraine and the Middle East, prompting governments worldwide to invest in weaponry.
Consequently, BAE Systems’ overall backlog soared to an unprecedented 70 billion pounds.
The share prices had soared to unprecedented levels leading up to the announcement, but experienced a 3% decline post-results.
This dip in share prices might be attributed to the more moderate 6% to 8% growth in earnings per share predicted by the $46 billion company for the current year.
As of Wednesday, shares are trading at approximately 1,212 pence, around 18 times the upper end of BAE Systems’ earnings forecast for 2024, as per Breakingviews’ analysis.
This valuation slightly lags behind the average multiple of about 20 times for leading European defence competitors, according to LSEG data, implying a potential upside of 10%.
This is particularly plausible if escalating geopolitical tensions prompt governments to further bolster their defence arsenals.
Despite this, BAE Systems’ shares, a crucial supplier of Eurofighter Typhoon jets, have surged over 100% since Russia’s invasion of Ukraine two years ago, reaching a new peak earlier this week.
Even if BAE fails to narrow its valuation disparity with its peers, investors have already reaped substantial benefits from the increased demand for military equipment spurred by global conflicts. (By Lisa Jucca)