BAE Systems (GB:BA)
LSE:BA
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BAE Systems
(LSE:BA)
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Rating:69Neutral
Price Target:
2,361.00 p
▲(9.51% Upside)
Action:ReiteratedDate:03/26/26
The score is driven primarily by solid financial performance (revenue growth and strong free cash flow) and a bullish, confidence-boosting earnings outlook (growth and margin expansion supported by a record backlog). This is tempered by elevated valuation, a softer near-term technical position (below the 20-day average with subdued RSI), and financial risks to monitor including recent margin volatility and higher leverage versus 2023.
Positive Factors
Record backlog / order visibility
A record GBP 84bn backlog provides durable multi-year revenue visibility and production planning certainty. For a defense prime, secured long-duration contracts reduce near-term demand risk, support steady cash generation and enable phased investment and capacity expansion over several years.
Negative Factors
Rising leverage
Leverage trending higher reduces financial flexibility and increases exposure to interest or refinancing stress if margins or cash conversion deteriorate. While still within industry norms, elevated debt constrains aggressive share returns or extra M&A and heightens sensitivity to operational setbacks.
Read all positive and negative factors
Positive Factors
Negative Factors
Record backlog / order visibility
A record GBP 84bn backlog provides durable multi-year revenue visibility and production planning certainty. For a defense prime, secured long-duration contracts reduce near-term demand risk, support steady cash generation and enable phased investment and capacity expansion over several years.
Read all positive factors
BAE Systems (BA) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£62.84B
Dividend Yield1.99%
Average Volume (3M)7.09M
Price to Earnings (P/E)24.9
Beta (1Y)0.62
Revenue Growth11.60%
EPS Growth8.03%
CountryUK
Employees107,400
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.41
Shares Outstanding2,997,340,800
10 Day Avg. Volume8,156,017
30 Day Avg. Volume7,094,591
Financial Highlights & Ratios
PEG Ratio4.05
Price to Book (P/B)4.36
Price to Sales (P/S)1.81
P/FCF Ratio21.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£2,229.56Price Target Upside3.41% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
EPS Forecast (FY)0.83
Revenue Forecast (FY)£32.96B
BAE Systems 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 offer...
How the Company Makes Money
BAE Systems primarily makes money by winning and executing government and defense-prime contracts, where revenue is earned from the delivery of platforms and capabilities (e.g., ships, submarines, combat vehicles, mission systems) and from ongoing...
BAE Systems Earnings Call Summary
Earnings Call Date:Feb 18, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Jul 30, 2026
Earnings Call Sentiment Positive
The call emphasized strong, broad-based financial and operational performance: record sales, double-digit EBIT and EPS growth, a record GBP 84bn backlog, robust cash generation and significant investment in R&D and CapEx to support future growth. Key growth engines include Europe (backlog exposure), MBDA, U.S. munitions/space and Platforms & Services. Challenges flagged were manageable: cash flow timing volatility from customer advances, higher 2026 tax rate, early-stage low margins in maritime programs, and capacity/CAPEX needs for munition ramps. Overall, positives (scale, margin expansion, backlog, cash generation, strategic investments and credible guidance) materially outweigh the contained lowlights, though execution and timing risks will need monitoring.Positive Updates
Record Revenue and Strong Top-Line Growth
Group sales rose 10% to GBP 30.7bn in 2025 (organic growth 9%), driven by across-the-board sector growth (Platforms & Services +17%, Maritime +11%, Air +9%, Electronic Systems +8%). Five-year CAGR in sales ~8% with sales up >50% on a constant currency basis.
Negative Updates
Cash Flow Variability Driven by Advance Receipts
Operating and free cash flow are volatile due to timing of customer advances. Guidance excludes material advance receipts; 2026 free cash guidance is >GBP 1.3bn (lower than 2025's GBP 2.2bn) and management expects a ~GBP 600m unwind of advances in 2026.
Read all updates
Q4-2025 Updates
Positive
Negative
Record Revenue and Strong Top-Line Growth
Group sales rose 10% to GBP 30.7bn in 2025 (organic growth 9%), driven by across-the-board sector growth (Platforms & Services +17%, Maritime +11%, Air +9%, Electronic Systems +8%). Five-year CAGR in sales ~8% with sales up >50% on a constant currency basis.
Read all positive updates
Company Guidance
BAE guided to another strong 2026, targeting group sales growth of 7–9% (air and Platforms & Services 9–11%, Electronic Systems 6–8%, maritime and Cyber & Intelligence mid‑single digits), with underlying EBIT and EPS both expected to grow 9–11% (EBIT outpacing sales and with further margin expansion), free cash flow (excluding any material new advance receipts) expected to exceed GBP 1.3bn (the company flags a circa GBP 600m unwind of advances in 2026 and therefore does not include unpredictable advance receipts in guidance), and a three‑year free cash target for 2026–28 of greater than GBP 6bn (including assumed unwind and higher investment). Management reiterated continued high CapEx and R&D investment (CapEx averaging close to GBP 1bn pa and higher in the near term), a disciplined capital allocation ladder (dividend cover ~2x with a 10% FY2025 dividend increase and GBP 1.5bn returned in 2025), a strong balance sheet (net debt GBP 3.8bn; net debt/EBITDA 0.9x; Moody’s A3) and that it does not guide order intake or include material advance receipts in its cash guidance.BAE Systems Financial Statement Overview
Summary
Income Statement
76
Positive
Balance Sheet
68
Positive
Cash Flow
72
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 28.34B | 26.31B | 23.08B | 21.26B | 19.52B |
| Gross Profit | 2.50B | 17.23B | 15.10B | 5.91B | 5.19B |
| EBITDA | 3.67B | 3.97B | 3.45B | 2.81B | 2.91B |
| Net Income | 2.06B | 1.96B | 1.86B | 1.59B | 1.76B |
Balance Sheet | |||||
| Total Assets | 37.68B | 38.14B | 32.06B | 31.46B | 27.14B |
| Cash, Cash Equivalents and Short-Term Investments | 3.62B | 3.38B | 4.11B | 3.36B | 3.11B |
| Total Debt | 10.56B | 10.15B | 6.48B | 6.86B | 6.36B |
| Total Liabilities | 25.74B | 26.36B | 21.34B | 19.06B | 18.66B |
| Stockholders Equity | 11.78B | 11.62B | 10.56B | 11.21B | 7.44B |
Cash Flow | |||||
| Free Cash Flow | 2.38B | 2.76B | 2.80B | 2.00B | 1.82B |
| Operating Cash Flow | 3.30B | 3.92B | 3.76B | 2.70B | 2.28B |
| Investing Cash Flow | -919.00M | -5.27B | -541.00M | -548.00M | -14.00M |
| Financing Cash Flow | -2.26B | 695.00M | -2.19B | -2.06B | -1.99B |
BAE Systems Technical Analysis
Positive
2156.00
Price Trends
2098.83
Positive
1933.60
Positive
1897.98
Positive
Market Momentum
31.90
Positive
47.15
Neutral
14.08
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:BA, the sentiment is Positive. The current price of 2156 is below the 20-day moving average (MA) of 2231.45, above the 50-day MA of 2098.83, and above the 200-day MA of 1897.98, indicating a neutral trend. The MACD of 31.90 indicates Positive momentum. The RSI at 47.15 is Neutral, neither overbought nor oversold. The STOCH value of 14.08 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:BA.
BAE Systems Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | £100.37B | 16.57 | 227.54% | 0.91% | 9.62% | 146.74% | |
69 Neutral | £62.84B | 24.91 | 17.90% | 1.99% | 11.60% | 8.03% | |
68 Neutral | £6.22B | 9.88 | 43.22% | 0.56% | 7.36% | 48.93% | |
64 Neutral | £7.22B | 15.58 | 13.46% | 1.93% | -6.93% | 18.57% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
63 Neutral | £1.35B | 32.18 | 13.12% | 1.64% | -2.53% | 22.25% | |
58 Neutral | £2.48B | 20.00 | -35.50% | 2.00% | -4.59% | -256.51% |
* Industrials Sector Average
GB:BA
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2,093.00
538.54
34.64%
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GB:BAB
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GB:CHG
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GB:SMIN
Smiths Group plc
2,308.00
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20.42%
GB:QQ
QinetiQ
475.00
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19.97%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.