BAE Systems plc ADR (BAESY) AI Stock Analysis

• Market Cap: $87.60B
• Dividend Yield: 1.89%
• Average Volume (3M): 88.17K
• Price to Earnings (P/E): 31.3
• Beta (1Y): 0.52
• Revenue Growth: 14.68%
• EPS Growth: 10.99%
• Country: US
• Employees: 107,400
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): 2.13
• Shares Outstanding: 749,698,000
• 10 Day Avg. Volume: 60,878
• 30 Day Avg. Volume: 88,171
• PEG Ratio: 5.45
• Price to Book (P/B): 4.38
• Price to Sales (P/S): 1.86
• P/FCF Ratio: 22.15
• Enterprise Value/Market Cap: 0.83
• Enterprise Value/Revenue: 2.57
• Enterprise Value/Gross Profit: 29.11
• Enterprise Value/Ebitda: 19.25
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 4.51
• Revenue Forecast (FY): $44.46B

• Rating: 72 Outperform
• Price Target: $129.00 ▲(29.10% Upside)
• Action: Upgraded Date: 02/20/26
• Date: Action: Upgraded 02/20/26

The score is driven primarily by solid underlying financial performance and a strong technical uptrend, reinforced by a constructive earnings-call outlook supported by record backlog and guidance for continued growth. The main constraints are valuation (high P/E) and some financial quality concerns around rising debt and cash-flow/margin variability.

Positive Factors

Record backlog

A record GBP 84bn backlog (≈3x sales) and ~GBP 260bn pipeline provide durable multi-year revenue visibility tied to long-term government procurement. This structural backlog underpins steady production, high contract renewal probability and predictable forward revenue for 2–6+ months horizon.

Strong cash generation & balance sheet

Consistent positive free cash flow and a meaningful net-debt reduction (net debt/EBITDA ~0.9x ex-lease) plus a Moody's A3 upgrade materially improve financial flexibility. This supports sustained capex, R&D funding, shareholder returns and optionality for M&A without jeopardizing core operations.

Large R&D and capacity investment

Substantial, sustained investment in self-funded R&D and expanded production footprint, including major U.S. capacity, strengthens long-term competitive advantage. These investments improve product pipeline, support higher-margin programs and enable execution on elevated backlog over multiple years.

Negative Factors

Rising total debt

Material increase in total debt into 2024–25 reduces headroom for cyclical stress and limits optionality versus prior years. Higher absolute leverage can constrain capital allocation during downturns and raises sensitivity to interest costs and covenant constraints despite acceptable debt/equity metrics for the sector.

Cash-flow timing volatility

Dependence on customer advance receipts and lumpy collections causes uneven operating cash flow and forces conservative guidance that excludes advances. This timing volatility complicates multi-year planning, can depress reported FCF in certain years and raises working-capital and liquidity management risk.

Low early-stage maritime margins

Large, early-stage maritime and submarine programs carry below-par margins and execution risk, dragging consolidated profitability until program maturation. Such projects are multi-year and expose the company to cost overruns, schedule delays and lower near-term margin sustainability in a key revenue segment.

BAE Systems plc ADR Business Overview & Revenue Model

Company Description

BAE Systems plc provides defense, aerospace, and security solutions worldwide. The company operates through five segments: Electronic Systems, Cyber & Intelligence, Platforms & Services (US), Air, and Maritime. The Electronic Systems segment offers electronic warfare systems, navigation systems, electro-optical sensors, military and commercial digital engine and flight controls, precision guidance and seeker solutions, military communication systems and data links, persistent surveillance systems, space electronics, and electric drive propulsion systems. The Cyber & Intelligence segment provides solutions to modernize, maintain, and test cyber-harden aircraft, radars, missile systems, and mission applications that detect and deter threats to national security; systems engineering, integration, and sustainment services for critical weapons systems, C5ISR, and cyber security; and solutions and services to intelligence and federal/civilian agencies. It also offers data intelligence solutions to defend against national-scale threats, protect their networks, and data against attacks; security and intelligence solutions to the United Kingdom government and allied international governments; anti-fraud and regulatory compliance solutions; and enterprise-level data and digital services. The Platforms & Services (US) segment manufactures combat vehicles, weapons, and munitions, as well as provides ship repair services and the management of government-owned munitions facilities. The Air segment develops, manufactures, upgrades, and supports combat and jet trainer aircraft. The Maritime segment designs, manufactures, and supports surface ships, submarines, torpedoes, radars, and command and combat systems; and supplies naval gun systems. It also supplies naval weapon systems, missile launchers, and precision munitions. The company was founded in 1970 and is based in Farnborough, the United Kingdom.

How the Company Makes Money

BAE Systems generates revenue primarily through the sale of defense and security products and services to government and commercial customers. The company operates through several key segments, including Electronic Systems, Platforms & Services, and Cyber & Intelligence, each contributing to its overall revenue. Major revenue streams include contracts for military aircraft, naval ships, and land vehicles, as well as electronic systems and cybersecurity solutions. BAE Systems often secures long-term contracts with governments, which provide a stable revenue base. Strategic partnerships with other defense contractors, government agencies, and international allies also enhance its earnings potential, allowing for collaborative projects and shared technology development.

BAE Systems plc ADR Financial Statement Overview

Summary

Steady multi-year revenue growth and solid net profitability support the score, and free cash flow is consistently positive with decent cash conversion. Offsetting factors include rising total debt into 2024–2025 and choppy operating/free cash flow and reported margin consistency, which reduce confidence in near-term earnings quality.

Income Statement

Revenue has grown steadily from 2020 to 2025 (from ~$19.3B to ~$27.7B), supporting a generally solid earnings profile. Profitability is respectable for the sector with net margins mostly in the ~7–9% range, though they have drifted slightly lower versus the 2021 peak. A key watch item is volatility/inconsistency in reported gross margin across years (including very low values in 2020/2021/2022/2025 versus very high values in 2023/2024), which makes the underlying margin trajectory harder to read despite stable net income growth.

Balance Sheet

Leverage is moderate: debt-to-equity is below 1.0 in most recent years (2023–2025), which is acceptable for a large defense prime, and equity has improved substantially versus 2020. That said, total debt has risen meaningfully into 2024–2025 (to ~$10–10.5B), reducing balance-sheet flexibility versus 2022–2023 levels. Returns on equity are strong (mid-to-high teens recently), but part of that strength is supported by leverage, so debt discipline remains important.

Cash Flow

Cash generation is consistently positive, with free cash flow covering a meaningful portion of earnings (roughly ~70–80% of net income across 2021–2025), which supports capital returns and resilience. However, operating cash flow has been choppy (down in 2025 versus 2024), and free cash flow growth is volatile year-to-year (strong in 2023 and 2025, weaker/negative in 2020 and 2024). Overall cash conversion is decent but not consistently improving, which tempers the score.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	27.72B	26.31B	23.08B	21.26B	19.52B
Gross Profit	2.44B	17.23B	15.10B	2.77B	2.50B
EBITDA	3.59B	3.97B	3.45B	3.06B	3.13B
Net Income	2.02B	1.96B	1.86B	1.59B	1.76B
Balance Sheet
Total Assets	37.61B	38.14B	32.06B	31.46B	27.14B
Cash, Cash Equivalents and Short-Term Investments	3.61B	3.38B	4.11B	3.36B	3.11B
Total Debt	10.55B	10.15B	6.48B	6.97B	6.36B
Total Liabilities	25.70B	26.36B	21.34B	20.06B	19.47B
Stockholders Equity	11.76B	11.62B	10.56B	11.21B	7.44B
Cash Flow
Free Cash Flow	2.33B	2.76B	2.80B	2.15B	1.99B
Operating Cash Flow	3.23B	3.92B	3.76B	2.84B	2.45B
Investing Cash Flow	-898.86M	-5.27B	-541.00M	-422.00M	66.00M
Financing Cash Flow	-2.21B	695.00M	-2.19B	-2.33B	-2.26B

BAE Systems plc ADR Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 99.92
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For BAESY, the sentiment is Positive. The current price of 99.92 is below the 20-day moving average (MA) of 109.75, below the 50-day MA of 105.48, and below the 200-day MA of 100.17, indicating a bullish trend. The MACD of 3.23 indicates Negative momentum. The RSI at 69.10 is Neutral, neither overbought nor oversold. The STOCH value of 76.48 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for BAESY.

BAE Systems plc ADR Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NOC	77 Outperform	$109.00B	24.91	26.17%	1.55%	-0.14%	72.35%
LHX	75 Outperform	$70.69B	42.76	8.20%	1.61%	2.83%	47.00%
GD	74 Outperform	$98.63B	23.10	17.66%	1.73%	11.86%	17.39%
LMT	74 Outperform	$155.70B	30.63	76.87%	2.77%	2.88%	-35.15%
BAESY	72 Outperform	$87.60B	31.32	17.90%	1.89%	14.68%	10.99%
HII	67 Neutral	$17.81B	28.88	12.42%	1.53%	2.60%	-18.22%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%