BAE Systems PLC (LSE:BA.) has been downgraded to 'hold' after a leading analyst warned the group is unlikely to beat full-year expectations, despite solid demand across much of its business.
Deutsche Bank's Christophe Menard also lowered his target price to 2,140p from 2,220p, citing weaker-than-expected profitability in the maritime division.
Margins there are running at about 6.5%, well below the 8% level previously guided, and are dragging on group performance, he pointed out.
Other areas are doing better. Air and Cyber & Intelligence are trading more strongly, and free cash flow is still expected to reach £1.5 billion. However, that figure remains below market consensus, limiting scope for positive surprises.
Looking ahead to 2026, BAE is guiding to organic growth of 7% to 8%, but only modest improvement in operating margins. Continued underperformance in Maritime remains a concern, while rising affordability pressures in both the UK and US defence markets add another layer of uncertainty.
The outlook in the US is described as increasingly blurred by Deutsche.
In late morning trading, the shares were flat at 2,099p.