leadf
logo-loader
viewBAE Systems PLC
(
LSE:BA.
)

BAE’s US acquisitions helping address “long-standing valuation discount”, says Barclays as it ups to ‘overweight’

The bank also said the purchase of the US military GPS business and airborne radios unit will increase revenue exposure to the US Department of Defense

Beale Ltd - BAE’s US acquisitions helping address “long-standing valuation discount”, says Barclays as it ups to ‘overweight’

BAE Systems PLC (LON:BAE) acquisition of a US military GPS business and airborne radios unit suggests that defence firm is looking to address “the main drivers of the long-standing valuation discount” to its American prime peers, according to analysts at Barclays.

In a note on Tuesday upgrading the FTSE 100 group to ‘overweight’ from ‘equal weight’ and increasing its target price to 760p from 550p, the bank said the US$2.2bn acquisition bundle from US defence giants Raytheon Co (NYSE:RTN) and United Technologies Corp (NYSE:UTX) will increase BAE’s revenue exposure to the Department of Defense and other attractive growth markets.

READ: BAE Systems agrees to buy GPS and radio assets spun out of US merger

Analysts also said that with the company’s cash generation improving, repayments under its pension scheme will achieve full funding, leaving “greater optionality” for where the company spends the rest of its money.

The bank added that the predictability of BAE’s free cash flow had improved thanks to a shift from large export order down-payment cash swings and toward higher profitability and cash generation through its Electronic Systems arm, a move that they said will be “propelled” by the recent US acquisition.

“We see…organic revenue growth & earnings growth as in line with US defence primes, which should deliver an increasingly attractive cash profile and higher returns”, Barclays said.

Shares in BAE were 0.3% lower at 633p in mid-morning trading on Tuesday.

Quick facts: BAE Systems PLC

Follow
LSE:BA.

Price: 559.2 GBX

Market Cap: £17.93 billion

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Supermarket Income REIT snap up six new acquisitions

Supermarket Income REIT PLC (LSE:SUPR)'s (LSE:SUPR) has acquired six supermarkets for a total purchase price of £113.1mln, including Marks & Spencer as a tenant for the first time. Steven Noble from Atrato Capital explains the rationale behind the purchases which consist of a Tesco in...

2 hours, 39 minutes ago

2 min read