BAE Systems plc (LON:BA.): Poised For Long-Term Success?

Since BAE Systems plc (LSE:BA.) released its earnings in December 2017, analysts seem cautiously optimistic, with earnings expected to grow by 34.60% in the upcoming year compared with the past 5-year average growth rate of -0.73%. Presently, with earnings at UK£854.00M, we should see this growing to UK£1.15B by 2019. Below is a brief commentary around BAE Systems's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here. View our latest analysis for BAE Systems

How is BAE Systems going to perform in the near future?

The 16 analysts covering BA. view its longer term outlook with a positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of BA.'s earnings growth over these next few years.

This results in an annual growth rate of 11.03% based on the most recent earnings level of UK£854.00M to the final forecast of UK£1.26B by 2021. EPS reaches £0.39 in the final year of forecast compared to the current £0.27 EPS today. The primary reason for earnings growth is due to reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. With a current profit margin of 4.66%, this movement will result in a margin of 6.24% by 2021.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For BAE Systems, I've put together three essential factors you should further research:

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Valuation: What is BAE Systems worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BAE Systems is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of BAE Systems? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.