Citi analysts have doubled down on backing for BAE Systems PLC (LSE:BA.) and batted off concerns around its exposure to a potential downturn in US defence spending.
Arguing the UK defence firm was “more attractive” than its transatlantic counterparts, Citi in a note reiterated BAE’s ‘buy’ rating.
BAE shares had taken a knock late last month following a downgrade by Bank of America analysts.
Citi highlighted this reflected concerns around US defence spending on the creation of the Department of Government Efficiency.
“While we understand these concerns, we note that BAE Systems has similar expected profit growth to US peers, better free cash flow conversion [and] less exposure to [the] US Department of Defense,” Citi said.
BAE also had a “much lower valuation,” Citi pointed out, highlighting its enterprise value to pre-tax earnings multiple of 14.4x, versus the sector’s average 17.7x.
BAE was seen as a “lower risk investment” as a result, Citi said.
Shares climbed 0.9% to 1,238.5p on Monday.