BAE Systems PLC (LSE:BA.) is the UK’s biggest defence contractor.
It makes fighter jets, submarines, cybersecurity, even satellites, the works.
While it’s a big, sprawling business, BAE is about locking in long-term, government-backed defence projects that just keep ticking along, year after year.
The half-year results for 2025 really show how much momentum they have right now.
The numbers
With governments everywhere ramping up defence budgets, BAE’s revenues climbed 11% to £14.6bn, and underlying profit (EBIT) rose 13% to £1.55bn.
Earnings per share were up 12%. That kind of growth doesn’t just happen by accident; it’s all about steady execution and a surge in demand, especially for submarines, space systems, and new-generation aircraft.
Here’s the part investors love: BAE’s order backlog has hit a record £75.4bn. That gives them brilliant visibility on future sales, exactly what you want in an industry where projects can run for decades.
New wins include a $1.2bn deal with the US Space Force, big progress on the Dreadnought-class submarines, and a huge new partnership (GCAP) to build a next-gen fighter jet with Japan and Italy.
Free cash flow was a slight wobble this half, with a £368m outflow, but that was flagged and came down to customer payment timing. Management still expects more than £1.1bn of free cash for the full year.
And to put it in perspective, Stockopedia points out that free cash flow per share has been compounding at 20.8% a year for the past six years, a serious track record.
Investor payback
Shareholders are being looked after too: £849m returned via dividends and buybacks so far, and the interim dividend is up 9% to 13.5p.
Guidance has been upgraded. Sales are now expected to grow 8–10%, EBIT by 9–11%, and EPS by 8–10%.
Management is clearly confident that strength is going to keep running through the business. As CEO Charles Woodburn put it: “The breadth and depth of our geographic and product portfolio, together with our trusted track record of delivery, strengthen our confidence in the positive momentum of our business.”
Stockopedia’s view
BAE scores a high StockRank of 81. Quality and Momentum are through the roof at 91 and 94, thanks to strong profitability, share price strength, and regular earnings upgrades.
The only thing pulling the score down is a low Value Rank of 20, which just reflects the fact that the shares aren’t cheap.
But for a business like this, that’s no surprise: it’s priced for consistency and long-term earnings, not as a bargain.
It trades on a forward P/E of over 22x and yields around 2.1%, so you are paying up for the quality.
That said, European peers like Rheinmetall and Safran trade on even higher P/Es (47x and 30.6x), so BAE could still offer relative value, even after a 40% share price jump over the past year.
Broker outlook
City analysts are upbeat. Citigroup has raised its target to 2,191p (from 2,145p) on the back of these results, while Deutsche Bank has a similar target at 2,170p.
A quick look at the pros and cons:
Bull points:
● £75bn backlog gives multi-year earnings visibility
● Upgraded full-year guidance supports momentum
● Big structural tailwinds from global defence spending
Bear points:
● Shares not cheap: P/E over 22, PEG above 1.5
● Cash conversion can be lumpy in the short term
● Political risk if defence budgets shift unexpectedly
Final thoughts
BAE is never going to be the most exciting share in the market, but that’s part of the appeal.
This is a business built on long-term, government-funded projects and international partnerships. Stockopedia calls it a “High-Flyer”, strong on quality and momentum.
If you want a dependable, dividend-paying company and don’t mind paying a premium for that security, BAE is well worth keeping on the radar after this set of results.
It’s not one for bargain hunters, but for anyone focused on resilience and cash generation over the long haul, it’s a name that deserves serious consideration.
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