BAE Systems PLC (LSE:BA.) has received another upgrade following the award of the £4 billion SSN-AUKUS UK nuclear submarine contract yesterday.
UBS said that after SSN-AUKUS it is increasing its price target by a further 6% to 1,220p, with the group well placed as European and Asian governments up their weapons spending in the current decade.
Recent developments in the US budget deadlock should also be positive for BAE.
At £3.95 billion, SSN-AUKUS is larger than expected by UBS even taking into account likely pass-through to Babcock, Rolls-Royce and sub-contractors.
This phase of work lasts until 2028 and will boost estimates by £200 million that year while a further £1 billion in revenues will come through in 2025 from the deliveries of Archer to Sweden.
Eurofighter production is also assumed to be stable at 15-20 units/year to the end of the decade, which includes an order of 48 planes from Saudi Arabia though further orders are possible.