2nd Aug 2023 10:35
(Alliance News) - BAE Systems PLC shares offered something of a port in a storm on Wednesday, with the defence firm being the best of the bunch in a beleaguered FTSE 100.
While the vast majority of its large-cap neighbours suffering after Fitch downgraded the US credit rating by a notch, BAE bucked the trend with its stock up 4.9% to 979.20 pence. The wider blue-chip index lost 1.4%.
Over the past 12 months, BAE shares have risen 22%, markedly outperforming the FTSE 100 which has added just 1.9%.
The defence, aerospace and security company on Wednesday reported a pretax profit of GBP1.20 billion in the six months ended June 30, up 54% from GBP779 million the year prior.
Revenue from continuing operations totalled GBP11.0 billion in the half, up 13% from GBP9.74 billion the previous year.
Edison analyst Andy Chambers said BAE has benefitted from a "general rearmament among Nato countries as the war in Ukraine grinds on".
"With the opening of new facilities in Manchester, New Hampshire, Texas, and Iowa, the company aims to increase its capacity and achieve a faster turnaround of orders – reducing this backlog. This bold strategy of expansion also hints at the BAE Systems' long-term outlook – the company clearly expects a permanently scaled-up demand for armaments in an increasingly uncertain world," Chambers added.
Looking forward, BAE Systems said the strong set of half-year results gave it the confidence to increase its annual guidance for sales and underlying earnings before interest and tax.
The company now expects sales growth of between 5% and 7% in 2023, up from previous growth guidance of 3% to 5%, and underlying Ebit growth between 6% and 8%, up from previous guidance of 4% to 6%.
In 2022, the company reported sales of GBP23.26 billion and underlying Ebit of GBP2.48 billion.
The company also declared it has approved a further share buyback programme of up to GBP1.5 billion.
Though rising so far this year, BAE Systems shares went into Wednesday around 10% off their year-to-date high of 1,037p.
Analysts at Shore Capital Markets put this down to the US debt ceiling drama hurting equity markets, as well BAE shares getting a slight knock from the failed Wagner Group rebellion in Russia in June.
Shore said both of these matters "are now in the rear view mirror".
"Instead, the macroeconomic landscape remains favourable to BAE and so we would use the recent weakness to buy the shares," Shore added.
By Eric Cunha, Alliance News news editor
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