Ball Aerospace buy puts BAE in solid position, says Shore Capital

by | Aug 17, 2023

(Sharecast News) – BAE Systems was trading with heavy losses on Thursday after the news that it has acquired Ball Aerospace – a move which broker Shore Capital viewed as a vote of confidence for the wider defence industry.
BAE announced it was spending $5.55bn on Ball Corporation’s aerospace business, which makes spacecraft, mission payloads, optical systems, and antenna systems, serving the intelligence community, US Department of Defense, and civilian space agencies.

Shore Capital analyst Jamie Murray pointed out that the acquired business is expected to generate EBITDA of $310m at an EBITDA margin of 14% – “broadly in line with BAE’s current margins”. BAE expects it to generate EBIT margins of 12% after fully incorporated, which is higher than Shore Capital’s own medium-term expectations for the group.

“​​The acquisition appears to have a significant number of synergies with BAE’s current US business and positions it in fast growing segments of the defence market,” Murray said.

“We have highlighted previously that capital allocation including acquisitions play an important role for BAE and so we are not surprised that an acquisition like this is happening. It is a theme that we expect to continue, not just with BAE Systems, but across the defence industry as players look to scale up their operations so that they can capitalise on the long-term uptick for defence products.”

Even before the acquisition, the broker had given the stock a fair value rating of 1,205p, suggesting 17% upside potential to Wednesday’s closing price of 1,002.5p.

The shares, however, were down 4.5% at 957.8p on Thursday morning.

Related articles

BofA Merrill Lynch upgrades Marks & Spencer to ‘buy’

BofA Merrill Lynch upgrades Marks & Spencer to ‘buy’

(Sharecast News) - Bank of America Merrill Lynch upgraded Marks & Spencer on Friday to 'buy' from 'neutral' as it argued the stock is still too cheap and consensus earnings too low. The bank said that despite the stock's outperformance year-to-date, it believes that...

Citi raises target price for Intertek

Citi raises target price for Intertek

(Sharecast News) - Citigroup has reiterated its positive stance on shares of Intertek, saying that the stock is now trading at historic valuation multiples. The bank has raised its target price for Intertek from 4,973p to 5,055p, and maintained a 'buy' rating. "We are...

Latest Articles

US open: Stocks steady as inflation continues to ebb

US open: Stocks steady as inflation continues to ebb

(Sharecast News) - Wall Street was on a firmer footing on the last trading day of the third quarter as a key inflation indicator printed slightly below the consensus forecasts. "The September rut in stock indices paused into quarter end as both Eurozone and the Fed's...

FTSE 100 movers: Severn Trent, JD Sports rally

FTSE 100 movers: Severn Trent, JD Sports rally

(Sharecast News) - London's FTSE 100 was up 0.5% at 7,642.68 in afternoon trade on Friday. Severn Trent was the standout performer on the index after saying it was seeking to raise £1bn for a transformation plan expected to create 7,000 jobs across the Midlands. JD...

Annual UK property sales fall in August – HMRC

Annual UK property sales fall in August – HMRC

(Sharecast News) - Annual house sales fell sharply in August, provisional government data showed on Friday. According to HM Revenue and Customs, the seasonally-adjusted estimate of UK residential transactions was 87,010 last month. That was a 1% uptick on July 2023...

BofA Merrill Lynch upgrades Marks & Spencer to ‘buy’

BofA Merrill Lynch upgrades Marks & Spencer to ‘buy’

(Sharecast News) - Bank of America Merrill Lynch upgraded Marks & Spencer on Friday to 'buy' from 'neutral' as it argued the stock is still too cheap and consensus earnings too low. The bank said that despite the stock's outperformance year-to-date, it believes that...

Retail sales climb as September heatwave fades – BDO

Retail sales climb as September heatwave fades – BDO

(Sharecast News) - High street sales pushed higher last week, industry research showed on Friday, as delayed autumn spending finally looked to have got underway. According to the latest BDO High Street Sales Tracker, total like-for-like sales rose by 5.51% in the week...

Join our mailing list

Subscribe to our mailing list to receive regular updates!

No Fields Found.
x