BAE Systems Earnings: Strong Set of Results, Raising Our Valuation on Improved Execution

Wide-moat BAE Systems upgraded 2024 guidance on the back of another strong set of results for 2023, with a record backlog of GBP 69.8 billion, representing more than 3.5 times annual sales. After incorporating the updated guidance, we are increasing our fair value estimate from GBX 1,170 to GBX 1,330 on the back of increased profitability for the air and platform divisions. In the midterm, we expect margin for the air sector and platforms to slightly increase from current levels driven by platforms running at full phase production and a higher share of aftermarket revenue.