Britain's BAE Systems lifts 2026 outlook as defence orders soar

By Sarah Young

LONDON, July 30 (Reuters) - BAE Systems raised its 2026 outlook on Thursday, continuing to benefit from strong demand as its biggest customer, the United States, ramps up munitions output and Britain pushes ahead with submarine and fighter jet programmes.

"In this heightened threat environment, our products and services remain in high demand," said BAE CEO Charles Woodburn.

BAE, which provides the United States with combat vehicles, electronic warfare systems and space capabilities, has seen its order book almost double since Russia invaded Ukraine in 2022.

Many western countries have pledged to lift their military budgets, while the Iran war means U.S. and Middle East customers are also looking at new orders.

STRUCTURAL TAILWINDS

BAE's shares, which have rocketed 260% over the last five years and 18% in the year to date, were up 1% in early deals after it said it expected underlying operating profit to rise by 10% to 12% this year, up from its previous 9% to 11% forecast.

"BAE Systems has once again demonstrated why it remains one of the standout names in the European defence sector," said Quilter Cheviot analyst Matt Dorset.

"The upgraded guidance reflects both the strength of execution and the structural tailwinds supporting the sector."

Woodburn was at BAE's shipyard in Barrow, north-west England, where he will be joined by Britain's new Prime Minister Andy Burnham and new defence minister Wes Streeting. They will hand BAE the latest phase of a submarine contract worth £5.9 billion ($7.87 billion).

"The fact that he's here ... I think says a lot about their commitment for defence," Woodburn told reporters when asked about the direction of Britain's defence spending.

He said that the Typhoon fighter jet, one of BAE's key platforms which it sells to customers in the Middle East, was performing "exceptionally well" in the Iran war, with its capabilities recently boosted by an anti-drone weapon system.

"The situation in the Middle East is definitely putting defence even further up government spending priorities in the region," Woodburn said when asked whether Saudi Arabia and other countries would order more Typhoons.

For the first six months of the year, BAE posted operating profit of £1.70 billion, beating an analyst consensus of £1.66 billion and up 11% on the year earlier.

($1 = 0.7492 pounds)

(Reporting by Sarah Young; Editing by Kate Holton, Paul Sandle and Alexander Smith)