FTSE 100

BAE share price flat after company releases 2020 final results

The BAE share price (LON: BA) (BA.L) has not reacted sharply in either direction today to the release of its full-year results for the 2020 financial year.

They showed an increase in sales of 4%, from £20.1 billion to £20.8 billion. Underlying earnings per share increased from 45.8p in 2019 to 46.8p (excluding a one-off tax benefit last year). This is a rise of just over 2%. Its dividend per share increased from 9.4p to 13.8p in respect of the previous two years’ performances.

The firm’s order intake increased from £18.5 billion to £20.9 billion. Its order backlog was little-changed versus last year at £45.2 billion. Meanwhile, net debt increased from £743 million to £2.7 billion. This was largely due to the £1 billion bond issuance to fund BAE’s company pension scheme, as well as the £1.7 billion of acquisitions made during the year.

BAE share price strategic highlights

Over the past year, the BAE share price has fallen by around 22%. This compares to a 5% decline for the FTSE 100 (INDEXFTSE: UKX). In the company’s 2020 financial year, its Air segment had contract wins including a deal to support the production of 38 Typhoon aircraft for the German Air Force. The Qatar Typhoon and Hawk programmes also met their contractual milestones.

The firm also continued to advance its construction of the first two Dreadnought Class submarines. Meanwhile, today’s update states that its recently acquired Airborne Tactical Radios and Military Global Positioning Systems businesses are performing well as they are integrated into the business. It also delivered the first production Armored Multi-Purpose Vehicles in the second half of the 2020 financial year.

BAE also reported in today’s results that its Applied Intelligence segment experienced strong order intake during the year. Its US-based Intelligence & Security business has continued to maintain its bid pipeline and is performing on existing contracts.

Future outlook

BAE shared guidance for the 2021 financial year in today’s results. It expects sales to grow by 3-5% in the current year. Excluding the impact of foreign exchange, it anticipates growth of 5-7% for the year. Underlying earnings per share are expected to grow by between 3% and 5%, while free cash flow is forecast to be in excess of £1 billion in 2021. The firm has a three-year free cash flow target of over £4 billion.

Commenting on the results, the company’s CEO Charles Woodburn stated “we have delivered a strong set of results against a challenging backdrop of the global pandemic… In 2021, we will continue to drive operational performance, progress our sustainability agenda and invest in high-end discriminating technologies to meet our customers’ priorities”.

The BAE share price currently trades on a price-earnings ratio of 10.7. It has a prospective dividend yield of 5% using analyst forecasts for the 2021 financial year. Consensus analyst forecasts currently expect a rise in its earnings per share of 10% in 2021, and 9% in 2022.

Not Investment Advice Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.