Can anything stop the BAE Systems share price now?

BAE Methods‘ (LSE: BA) share value is topping the FTSE 100 leaderboard as I write this in 13 June, as I guessed it might be.

I reckoned the defence engineer was solely going a method after information broke that Israel had attacked Iranian nuclear services. Whereas almost all my portfolio is within the pink this morning, BAE Methods is a uncommon exception, together with oil big BP.

Writing that doesn’t give me any pleasure. I’d a lot somewhat the BAE share value was falling, as a result of the world had discovered extra peaceable methods to kind out its variations. Sadly, that’s to not be.

FTSE 100 development star

BAE Methods shares are up 36% over the past 12 months and 275% over 5 years. Dividends come on prime of that. The uncomfortable reality is that demand for its weapons and defence programs is rising, and should rise additional after at present.

BAE had a powerful 2024, with full-year gross sales and underlying revenue each up 14% to £28.3bn and £3.02bn, respectively. Its order backlog hit a file £77.8bn, leaping 11% yr on yr.

That momentum has continued into 2025. On 7 Might, the corporate reaffirmed full-year steerage, forecasting income development of seven% to 9%, with underlying earnings anticipated to climb 8%. It’s concentrating on free money move of greater than £1.1bn.

BAE’s current contract wins are huge and diverse: a $356m procurement deal for armoured autos, a near-$800m extension with the US Air Pressure, and over $360m in amphibious automobile orders from the US Marine Corps. 

Packed order guide

Add one other £600m in missile system contracts through MBDA, and it’s simple to see why buyers are optimistic.

Inevitably, success is priced in. The shares commerce at a price-to-earnings ratio of simply over 27, in comparison with the FTSE 100 common of round 15 occasions. This displays market confidence that demand will stay sturdy.

However nothing in investing is assured. If world leaders make an actual effort to resolve tensions in Ukraine or the Center East, procurement budgets could possibly be reassessed. I’m not holding my breath, but it surely’s a chance. Money-strapped Western nations can also spend much less on defence than leaders declare.

Like most superior producers, BAE is dependent upon complicated provide chains and expert engineers. If elements are delayed or expertise turns into more durable to seek out, prices might rise and supply schedules slip. That might harm earnings.

Time to contemplate shopping for?

BAE can be uncovered to forex shifts and US tariff threats. Greater than half of its earnings is available in {dollars}, but it surely experiences in sterling. If the pound rallies in opposition to the greenback, reported earnings might take a knock. Right now, the pound is softening, however that won’t final.

Analysts’ consensus suggests the share value might hit 2,001p over the following 12 months. That’s up lower than 3% from at present’s 1,939p. It has to expire of steam sooner or later.

I postpone shopping for BAE Methods for ages, hoping to purchase on a dip, earlier than giving up and diving in final yr. It was costly then, however I’m already up 50%. I nonetheless assume buyers may take into account shopping for at present, regardless of the premium value.

It’s not low-cost. It’s not with out threat. However given human nature, it might’t be ignored.