BAE Systems (1K) | Buy (vs Hold) | BAE Watch

Research evidence excerpt

BAE Systems (1K) | Buy (vs Hold) | BAE Watch

#EarningsPreview #Positive #RatingChange

#FlashReport

Release date: 24 June 2026

Company research

ESG profile Buy (Hold)BAE Systems

United Kingdom | Aerospace & defence Beta Profile: MCap: GBP53.9bn

Target Price: 2085p (2160.00) Change in TP: -3.5 % Bloomberg: BA/ LN Reuters: BAES.L

Current Price: 1811.00p Change in Sales: none 26E/none 27E Free float 100%

Up/downside: 15.1% Change in Adj EBIT: none 26E/none 27E Avg. daily volume (GBPm) 17,972.5

YTD abs performance 5.7% Market data: 22 June 2026 Change in Adj. EPS: none 26E/none 27E

52-week high/low (GBP) 2331.00/1609.50

BAE Watch Price performance

Why this report?

The resignation of Keir Starmer as Prime Minister marks a climax of the

political hesitations that had overshadowed UK defence budgets. The

reaction of the gilt market indicates that sovereign risks have been priced in.

Similar debates are ongoing ahead of the midterm US election, albeit with the

key debates relating to the size of the supplementals, which shall remain big

in absolute terms. Whatever the budget outcomes, we note that BAE Systems

portfolio is aligned with the long-term priorities of its two key customers and

remains somewhat isolated from the risks of further budget arbitrages,

creating a positive optionality. Our H1 results suggest no particular windfall

benefits from the US special military operation in Iran and a progression as

predictable as the base case linear trajectory earmarked by the company in

its yearly guidance. This is set to further highlight BAE's highly dependable FY to 31/12 (GBP) 12/26E 12/27E 12/28E

low double-digit EPS growth and yield. Although we cut our TP to reflect Sales 32,928 35,482 38,490

EBITDA adj. 4,773 5,199 5,599