Proactive Investors - Shares in BAE Systems (LON:BAES) PLC (LSE:BA.) remain a strong prospect following a positive trading update and optimistic market conditions, according to a Deutsche Bank (ETR:DBKGn) note.
In it, analysts raised their price target for the company from 1,440p to 1,540p, highlighting steady financial performance and strong order intake.
BAE reported £25 billion in new orders for the year, translating to a book-to-bill ratio of at least 1.1 for 2024, indicating solid future growth.
Its Maritime and Platforms & Services divisions continue to expand, while its SMS Ball unit is performing as expected following integration.
The German bank pointed to favourable conditions in BAE’s key markets. With 42% of sales in the United States, the company is well-placed to benefit from anticipated increases in US defence spending under President-elect Donald Trump.
Although his specific plans remain unclear, higher budgets are widely expected. In the UK, where 26% of sales occur, a strategic defence review scheduled for early 2025 is unlikely to impact growth.
Analysts believe efficiency drives within the defence sector will not outweigh the benefits of increased spending, leaving BAE in a “sweet spot” for sustained expansion.
The stock was up 0.8% in early trading to 1,344.5p.