Deutsche Bank reiterated its 'hold' recommendation on BAE Systems plc with a 2,140p price target following full-year 2025 results.
Analyst Christophe Menard described the results as broadly in line at the operating level but ahead on order intake and free cash flow.
Order intake reached £36,800 million, 15.2% above consensus expectations.
Free cash flow beat consensus by 41.5%, while the beat versus Deutsche Bank’s estimates was 15%.
Revenue of £30.7 billion was in line with expectations.
Earnings before interest and tax of £3.3 billion were 1% ahead of consensus. EPS of 75.2p were 1.3% above consensus, while the dividend was 1.1% ahead.
For 2026, guidance was broadly in line with market expectations.
However, Deutsche noted that earnings per share growth was slightly below prior expectations due to a higher tax rate.
Free cash flow guidance of more than £1.3 billion appeared light relative to market expectations.
Free cash flow represents cash generated after capital expenditure and is a key measure of balance sheet flexibility and capacity for shareholder returns.
Deutsche observed that BAE had historically guided cautiously on free cash flow and subsequently exceeded its initial outlook.
As a result, the bank suggested that the market might not focus heavily on the conservative 2026 free cash flow guidance at this stage.
Within divisions, the Maritime segment reported a 6.7% operating margin.
Deutsche attributed this to milestone timing effects and the presence of several first-in-class programmes, which typically carry lower initial margins.
Management expected margins in Maritime to improve as these programmes matured and execution risk reduced.
Overall, Deutsche viewed the 2025 performance as solid, supported by strong order momentum and cash generation, but judged that valuation limited near-term upside.
In afternoon trading, the shares were flat at 2,106p.