Berenberg upgrades BAE Systems to 'buy'
By Michele Maatouk
Date: Friday 26 Aug 2016
(ShareCast News) - Berenberg upgraded BAE Systems to 'buy' from 'hold' and lifted the price target to 580p from 520p.
The bank said it expects a material order book uplift, an improving cash profile in 2017 - with potential upside to guidance - and a secure progressive dividend across its forecast.
"We anticipate a material order intake, which could generate a 10-20% uplift to the £36.6bn order book (as at H1 FY 2016)."
Following the UK parliamentary vote in favour of funding the Successor programme, Berenberg expects an award in excess of £1bn, possibly as early as September, to reflect the commencement of the production phase for one year.
In addition, it anticipates the renewal of a five-year Saudi support contract, the total value of which it estimates at around £7bn, and an original equipment order for an additional 48 Typhoon aircraft, which it values at around £4bn.
The bank lifted its earnings per share estimates for 2016/17/18 by 5%/8%/8% respectively to reflect the first-half results, FX profit tailwinds from post-Brexit sterling weakness and a healthy US market where the book-to-bill ratio is strengthening.
At 0858 BST, shares were up 1.9% to 538.56p.
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