LONDON, June 24, 2026, 10:04 BST
BAE Systems shares dropped 1.9% to 1,789.5 pence by 0947 BST Wednesday, falling behind the FTSE 100, which was flat in early moves. The slide knocked around £1 billion off its £52.53 billion market cap and more than wiped out Tuesday’s 0.77% rise. BAE is now trading about 24% under its 52-week high.
Europe’s defence stocks took a hit. The aerospace and defence index dropped 1.3%. Rheinmetall slid 13.9% after a report that Germany could drop a big frigate project. Shares in TKMS jumped 9.2% as it was reportedly favored to build smaller vessels. “You’ve got a very unstable environment and ongoing wars. That should feed into positive sentiment towards the defence sector, but it’s not happening,” Morningstar strategist Michael Field said. Reuters
BAE faced tough timing. On Monday, Australia and Canada signed a A$2.5 billion Arctic over-the-horizon radar deal, with BAE Systems Australia picked as the industry partner. Canada said Australia and BAE also inked a production contract, though BAE did not say how much of the total will go into its own order book.
BAE shares are showing a deeper divide between demand for orders and current valuation. FTSE Russell numbers from June 22 had BAE trading 9.2% under its 50-day moving average, and 7.7% below the 200-day. A moving average measures the mean share price over time. For the last year, BAE lagged the FTSE 350 by 21.7 percentage points.
BAE’s £83.6 billion order backlog stands out—about 1.6 times its market cap, with work secured and waiting to be recognized as sales. The company picked up £36.8 billion in orders in 2025. The focus now is on how BAE delivers and on margins, not on demand.
Maritime remains a weak spot. Backlog ended the year at £21.3 billion—about a quarter of BAE’s total—but the 2025 margin slipped to 6.7% from 7.7%. Underlying profit for Maritime fell 3%. BAE said that margins were squeezed by first-in-class programs and more spending at shipyards and suppliers. Maritime backlog fell by £1.9 billion.
But there’s risk in the outlook. BAE stuck to its 2026 targets: sales growth of 7%-9%, underlying EBIT up 9%-11%, EPS up 9%-11%, and free cash flow of more than £1.3 billion. The company said each five-cent swing in sterling against the dollar would shift sales by around £500 million, underlying EBIT by £70 million and EPS by 1.4 pence. “We’ve delivered a strong start to 2026, underpinning our full-year guidance,” Chief Executive Charles Woodburn said.
BAE is set to report its first-half numbers on July 30. Investors want to see how radar contracts are booked and if Maritime margins pick up.
