1H26 Preview: Business As Usual: BAE Systems PLC | Europe

Research evidence excerpt

1H26 Preview: Business As Usual: BAE Systems PLC | Europe

Update

June 22, 2026 04:00 AM GMT

Morgan Stanley & Co. International plc+MBAE Systems PLC | Europe Ross Law, CFA

Equity Analyst

1H26 Preview: Business As Ross.Law@morganstanley.comMarie-Ange Riggio +44 20 7677-0560

Marie-Ange.Riggio@morganstanley.com +44 20 7677-2003

Usual Leonore Pele

Research Associate

Leonore.Pele@morganstanley.com +44 20 7425-2044

Despite ongoing UK political uncertainty, BAE continues to

execute to plan. We forecast growth at the mid-point of the FY BAE Systems PLC (BAES.L, BA/ LN)

guidance range of 7-9%, with the margin broadly flat yoy given Aerospace & Defence | United Kingdom

Stock Rating Overweight

mix. Cash should be better yoy (neutral), supported by a solid Industry View Attractive

Price target 2,662p

B2B (~1x). Shr price, close (Jun 19, 2026) 1,847p

52-Week Range 2,360-1,529p

1H26 Preview: we forecast group revenues of £15.5bn, up 7.7% on a cc (constant Mkt cap, curr (mn) £55,173

Net Debt, For Consensus (12/26e) £3,419

currency) basis (5.8% reported), around the mid-point of the FY guidance range of 7- (mn)**

9%. Key drivers of growth are P&S and Air divisions, followed by ES. We assume a EV, curr (mn)* £59,173

GBP/USD rate of 1.35. We forecast an adj. EBIT of £1.6bn, with the margin broadly ** = Based on consensus methodology

* = GAAP or approximated based on GAAP

flat at 10.5% (-10bps yoy). FCF is expected to be neutral (£10m), compared to

Fiscal Year Ending 12/25 12/26e 12/27e 12/28e

negative in 1H25 (-£368m), due to a lower magnitude of cash outflows following

Sales / Revenue 30,662 32,981 35,204 37,305

year-end inflows (downpayments). We expect a solid order intake (book-to-bill (£mn)**

EBITDA (£mn)** 4,434 4,774 5,168 5,508

~1.0x). EBIT (£mn)** 3,322 3,610 3,953 4,245