BAE Systems share price has jumped by over 65% this year, and is hovering near its all-time high of 1,997p. It has soared by 45% in the last 12 months and 375% in the last five years, making it one of the best-performing FTSE 100 constituents.
Rising revenue and backlog
BAE Systems and other top players in the European defense industry, like Rheinmetall, have done well in the past few years as geopolitical risks have jumped. This surge accelerated after Russia invaded Ukraine in 2022.
BAE Systems has been a top beneficiary of this as its growth has jumped because its products are in high demand. Some of its top products are its missiles, tanks, destroyers, and Typhoon planes.
The recent financial statements show that the company has become a growth story, helped by its strong demand. Its revenue jumped by 14% in 2024 to over £28.3 billion, while its underlying EBIT jumped by 14% to £3.015 billion.
Most importantly, BAE Systems’ backlog continued growing last year as countries boosted their defense spending. Its backlog jumped by £8 billion last year to £77 billion or $103.3 billion.
BAE Systems has one of the biggest backlogs in the industry. For example, Rheinmetall has a backlog of about $72 billion, while General Dynamics has over $88 billion.
Read more: Rheinmetall share price has jumped: here’s why it may dive soon
One of BAE System’s top benefits is that its business is highly diversified, with the United States accounting for 44% of sales. The UK accounts for about 26% of sales, while the Middle East has 12%.
In a recent statement, the company demonstrated its strong positioning in the air segment. Air’s revenue jumped by 14% last year to £8.5 billion, with most of its growth coming from Saudi Arabia.
Growth to continue
BAE Systems’ management believes that its growth has more room to run. It expects that its sales for the year will jump by between 7% and 8%, while its underlying EBIT will rise by between 8% and 10%. The company also anticipates that its free cash flow will be over £1.1 billion.
A key catalyst for this growth is the ongoing geopolitical concerns globally and defense spending from top countries in Europe, Asia, and the United States.
Donald Trump’s Big Beautiful Bill will add about $150 billion to defense spending. Meanwhile, in Germany, the parliament recently passed a major spending bill that increases defense and infrastructure spending by over 500 billion in the next few years.
Other European countries like France and the UK are expected to boost spending as geopolitical risks rise. This spending will likely lead to more sustained business for BAE Systems.
This, in turn, means that the company’s investors can expect to receive higher dividends this year. BAE paid a dividend of 33p last year, a 10% increase from a year earlier. It also repurchased 43 million shares last year.
BAE Systems share price analysis
The daily chart shows that the BAE Systems stock price bottomed at 1,110p in January and then jumped to nearly 2,000p on June 6. It then retreated to 1,900p as investors booked profits.
The stock remains above the 50-day and 100-day moving averages, a sign that bulls are in control. However, the Relative Strength Index (RSI) and the MACD have pointed downwards.
The other risk is that it has formed a rising wedge pattern, comprising of two converging trendlines. Therefore, the stock will likely pull back and possibly retest the 100-day moving average at 1,656p. A move above the resistance point at 1,994p will invalidate the bearish view.
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