Berenberg raises target price on 'well discounted' BAE
Analysts at Berenberg raised their target price on aerospace and defence firm BAE Systems from 560p to 655p on Friday, noting that confirmation of its full-year outlook was "exactly what was needed" to assuage investors' nervousness around the stock and support a steady rerating.
Aerospace and Defence
10,383.65
17:10 19/04/24
BAE Systems
1,296.00p
17:08 19/04/24
FTSE 100
7,895.85
16:59 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
Berenberg said that importantly, BAE's contract performance was "solid" throughout the first half, with no material changes seen, and noted that with organic sales and profit growth of 4% and 9%, respectively, the figures had somewhat derisked its full-year guidance for mid-single-digit growth in underlying earnings per share.
As a result, the German bank edged up its EPS forecast by 1-2% on the slightly better performance and favourable FX impacts.
Berenberg, which also reiterated its 'buy' rating on BAE's stock, added that despite the recent share price jump, the group's stock remained "well discounted" relative to peers.
The analysts also highlighted that the recent leadership change in the incrementally pro-defence UK Conservative Party had been "mildly positive" for the stock, as had the diminished risk of a Labour government headed by Jeremy Corbyn.
"Brexit, per se, does not represent a significant business risk to BAE (even a no-deal outturn), but a snap election scenario and heightened risk of a Labour government would be negative for sentiment," concluded Berenberg.