Berenberg ups target price for BAE on promising outlook
Berenberg has lifted its target price for and reiterated a 'buy' rating on aerospace and defence giant, saying growth drivers for the business remain "compelling".
The broker raised its target for the shares from 1,360p to 1,440p, indicating 20% upside from Monday's closing price of 1,199p.
"The growth drivers for BAE Systems (BAE) continue to be its Maritime division, and its armoured vehicles businesses in Sweden and the US (c33% of revenue combined)," Berenberg said in a research note on Tuesday.
"Visibility is extending in each of these areas through recent contract awards and the order pipeline will remain buoyant over the coming years, in our view. This will be driven by the restocking of military equipment linked to the conflict in Ukraine and the demand boost from the US supplemental aid package to Ukraine."
Beyond this, the broker pointed to long-term drivers like the Global Combat Air Programme fighter jet and the AUKUS submarine alliance, which will run for several decades, which provides good visibility for the business.
As for this year, Berenberg as pencilled in 13.2% revenue growth, in line with the company's own guidance of 12-14%, with EBIT margins flat at 10.6%, resulting in an adjusted EBIT of £3.04bn, down 0.7% on last year.
With a "promising" order outlook - particularly across BAE's armoured vehicle and combat air portfolio - the broker kept a positive stance on the stock, which trades at 15.9 times forward earnings.
Despite the upbeat comments, shares were down 1.2% at 1,184.5p by 1026 GMT.
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.