This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Trade Parameters
Technical Observations – For
Technical Observations – Against
The recent trading statement (8 Nov) saw the company back FY guidance, claiming Brexit impact likely limited. As the UK’s largest defense contractor the company is considered non-cyclical and “defensive”, less sensitive to economic ups and downs. Any new contracts could boost the shares. Solid 4.2% dividend.
Risks to BAE Systems shares include; significant GBP strength reducing the value of USD contracts; A sustained market recovery that sees preference for riskier stocks (e.g. Banks, Financials, Miners), a cut to UK defense spending because of Brexit and, of course, broker downgrades.
9 Nov: Raymond James upgrades to Mkt Perform (from Underperform). 8 Nov: Citi says BAE doing well. 2 Nov Credit Suisse upgrades to Outperform.
Brokers/analysts are bullish on the shares with only 9% suggesting Sell. This is supported by 88% of broker price targets suggesting upside from current levels, to a consensus target of 681p, bang in-line with our target of revisiting July’s trendline of falling highs resistance.
Next Event: FY Results, 21 Feb
Latest Broker 12-Month Consensus: 78% Buy, 13% Hold, 9% Sell (full breakdown on request)
Source: DowJones Newswires, Reuters News, Bloomberg or Company Press releases
| 1wk | 1m | 3m | 6m | 1yr | 2yr | 3yr | 4yr | 5yr | |
| Perf % | 3.6 | -7.8 | -13.9 | -15.1 | -3.1 | -8.8 | 18.4 | 17.0 | 19.2 |
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Prepared by Michael van Dulken, Head of Research