Purchases on Bae Systems in London, record orders push defence stocks in Europe

(Il Sole 24 Ore Radiocor) - Better-than-expected earnings, a record order book and a 10% dividend increase are driving buying on Bae Systems in London and across the European defence sector. Bae Systems is gaining around 3% in London, while in Milan, Leonardo - Finmeccanica and Fincantieri are running. Bae Systems announced a record order backlog, driven by the global increase in military spending, which also pushed up annual sales and profits. The order backlog amounted to £83.6 billion, up over 7% from last year - already a record year - of which £36.8 billion was booked in the current financial year. Net profit increased by over 5% to just over £2 billion, while turnover rose by 8% to £28.3 billion.

"In a new era of defence spending, fuelled by escalating security challenges, we arewell-positioned to provide both advanced conventional systems and the disruptive technologies needed to protect the nations we serve," said CEO Charles Woodburn. Nato countries pledged last June to invest five per cent of GDP in defence and security by 2035. Then, in recent days, British Prime Minister Keir Starmer, who aims to increase defence spending to 3% of GDP by 2034, stated that we need to 'go faster'. In addition, according to Reuters reports, Germany is planning to buy a minority stake in Knds, the Franco-German manufacturer of Leopard tanks, to maintain its influence over the company ahead of its EUR 20bn listing in the coming months.

In this context, Bae Systems placed an order last year from Turkey for 20 Eurofighter Typhoon aircraft, worth £4.6 billion to the company, as well as a £10 billion contract with Norway for frigates. The group is the British industrial partner of the future combat aircraft for the UK, Italia and Japan, expected in 2035 and called GCAP (Global Combat Air Programme), which will replace the Japanese F-2 and the Italian and British Eurofighters.

"Bae Systems continues to outperform, with all divisions contributing to revenue growth and earnings exceeding expectations," notes Aarin Chiekrie, analyst at Hargreaves Lansdown. Almost half of the group's revenue comes from the US, whose military spending 'exceeds that of any other country in the world', the analyst points out. Bernstein analysts point out, however, that Bae Systems expects sales to grow 7-9% in 2026, slowing from 2025, while those at eToro point out that the cash flow estimate for 2026 indicates that the growth trajectory of orders will continue to be strong.