BAE Systems Posts Full 2016 Financial Results – Company Shows Increase in Net Profit


BAE Systems stated on Thursday that the British aerospace group’s profit levels had grown by more than 400 percent due to lower impairments. However, the news wasn’t all good, as the company saw their underlying earnings decline due to poor spending in the defense segment from the Western world.

Thus, BAE Systems stated they achieve a net profit, or earnings after taxes, of $1.14 billion, compared to 2013, when the company achieved $258.8 million, indicating a growth of approximately 340 percent. The weak performance in 2013 was due to a very high impairment charge the company’s US branch had to support, which reached approximately $1.37 billion.

Despite the positive news in terms of profitability, the company’s underlying earnings before interest, tax and one-time costs declined by 11.5 percent, thereby reaching around $2.62 billion, compared to what analysts were expecting, which was approximately $2.67 billion.

Sales also saw a decline, coming in at $25.634 billion. This indicates a decline of 8.5 percent. The performance of the British aerospace group was also affected by unfavorable movements on the currency exchange markets, as well as the one-time improvement generated by the Salam deal last year with Saudi Arabia with better prices for Eurofighter jets.

BAE specified that their underlying profitability hadn’t changed significantly after making adjustments for the exchange rate and the Salam settlement on price in 2013, which wasn’t the norm.

On a more positive note, though, BAE Systems seems optimistic in terms of their future. Thus, BAE Systems stated their forecast for EPS, which is an essential metric to measure performance, will be slightly higher in 2017 because of new naval and aircraft orders.

Ian King, Chief Executive Officer of BAE Systems, stated that the company had performed strongly in 2016 and they had achieved the targets laid out in their guidance. He further explained the company was gaining new business constantly as they currently have more than $15.4 billion in new US and UK orders for the third year in a row. The result is that their backlog, which currently stands at $62.391 billion, allows them to make effective predictions over a number of years for quite a few of their businesses. King further explained that they feel US budgets have stabilized, with some signs that 2016 could see a modest improvement.

BAE Systems posted EPS of $0.58 per share for 2016, compared to $0.65 the company achieved in 2013, indicating a decline of approximately 10.8 percent. The company announced dividends of $0.32 per share, which is approximately the same as the previous year. Operating business cash flow reached $1.834 billion, compared to the $226.5 million achieved in 2013. BAE Systems closed out 2016 with a net debt of $1.589 billion, compared to the $1.076 billion in the previous year. The company achieved a return on sales of 10.2 percent thanks to solid margin performance.

BAE Systems has a market capitalization of $25.17 billion. The company’s stock has been trading between $25.7 and $32.72 over the past 52 weeks.



Joe Duerr covers Healthcare Services, Medical Devices and small cap Biotech companies. Prior to joining Micro Cap Mag, Joe was a large cap pharma contributor at Morningstar.

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