FY guidance maintained
Trading so far this year is in line with management's expectations.
Full year guidance is maintained, with good growth in revenue and EBIT as well as solid cash generation; underlying EPS +8% to +10% (2024: 68.5p) and FCF in 2025 of >£1.1bn.
This is using a cable rate of 1.28 for the year; a 5 cent movement impacts sales by c.£525m, underlying EBIT by c.£75m and underlying EPS by c.1.4p (INVe FY25e is 74.9p). The current spot rate is 1.34 (so, -2% impact if this rate prevails).
The order backlog and pipeline of work on incumbent positions provide good visibility and support long-term growth.
The regions in which BAE operate are poised for higher spending and provide a robust set of further opportunities.
Notable YTD orders include $356m for AMPV, $300m for ARCHER & TRIDON Mk2, $360m for ACV, $800m for ISC services (Intel & Security) to the US Air Force and c£600m for various MBDA domestic and export awards.
Self-funded R&D is focused on electronic warfare, autonomy, laser-guided weapons, uncrewed air systems, synthetic training, electrification applications and space solutions.
Buyback:
As at 6 May, BAE had completed £392m of the 3-year, up to £1.5bn, buyback programme, which commenced last July.
Valuation:
A CY25E P/E of 23.6x (vs. EU peer average of 31.8x and US peer average of 16.7x via FactSet), EV/EBITDA of 13.6x and FCF yield of 3.1%.
Next catalyst(s):
Air Sector site visit next week, UK Strategic Defence Review by end June, H1 results on 30 July.
