BAE Systems PLC (LSE:BA.) is shaking off the doubters and showing a “stronger cash flow generation phase”, according to analysts at Citi, with any previous scepticism over the aerospace firm’s shares now reset.
“What’s not to like,” Citi's analysts asked rhetorically in a note to clients, whilst pitching a 1,038p price target, versus a prevailing market price of around 815p.
The Citi analysts repeated a ‘buy’ rating for the FTSE 100-listed defence contractor in the wake of UK chancellor Jeremey Hunt’s recent autumn statement.
"We had been somewhat sceptical of the UK government’s ability to move defence spending to 3% of GDP, but post-Jeremy Hunt’s autumn statement, we believe expectations have been reset with the potential for increases to come through in the medium term, so now is a time to revisit," the analysts said.
In a mid-November trading update, BAE Systems outlined that it expected more growth next year, backed by a strong order book amid an “elevated threat environment”.
At the same time, it confirmed an order for warships worth £4.2bn, which combined with other orders marked a total of £10bn secured by the company since the end of the first half alone.
Reports of further orders came last week, as the Telegraph outlined a letter of intent had been sent to the company for the purchase of new artillery shells to replenish UK stocks sent to Ukraine.
BAE Systems Chief executive Charles Woodburn has previously commented: “Looking forward, our large order backlog, diverse portfolio position and focus on programme performance position us well for another year of top-line growth and margin expansion in 2023.”