BAE Systems Stock Outlook December 3, 2025: Dividend Day, New Defence Contracts and 2026 Forecasts

BAE Systems plc (LSE: BA.) stock enters December on the back of a multi‑year surge, a fresh wave of defence contracts and a dividend payment landing in shareholders’ accounts today, 3 December 2025. Yet after a sharp rally earlier in the year, the shares have also seen a noticeable pullback, prompting a very live debate: is BAE still a buy, or has the easy money already been made?

This article pulls together the latest news, contracts, forecasts and valuation analyses on BAE Systems stock as of 3 December 2025.

BAE Systems share price today: strong year, bumpy recent weeks

BAE Systems’ London‑listed shares are currently trading in the mid‑1,600p range, roughly around 1,600–1,650p. Recent broker snapshots and consensus data point to “current price” references of about 1,612–1,650p at the start of December. TS2 Tech+2MarketBeat+2

Performance has been powerful over longer periods:

Year‑to‑date 2025: the shares are up around 40–60% depending on the exact date you measure from. A recent Reuters piece cited a 57% rise since the start of the year as of the November 12 market update. ^[1]
Last 12 months: Simply Wall St estimates a gain of about 31% over the past year, even after the recent wobble. ^[2]
Recent pullback: the stock has dropped noticeably from its peak. A fresh article from The Motley Fool UK notes that the BAE share price is down roughly 22% in recent months, framing that slump as a possible buying opportunity. ^[3]

For context, the FTSE 100 has had a strong year too, up roughly 18–21% in 2025 according to recent UK market commentary, but BAE has significantly outpaced the index over most timeframes. ^[4]

In short: BAE Systems remains a market leader with substantial gains behind it, but volatility has picked up as investors re‑price expectations after a huge run.

Dividend paid today: 2025 interim payout lands

A key catalyst for income‑focused investors is today’s dividend payment.

Interim 2025 dividend:13.5p per share, up 9% year on year.
Payment date:3 December 2025.
Ex‑dividend date: late October 2025. ^[5]

The previous final dividend was 20.6p, giving a trailing ordinary dividend of roughly 34.1p per share. With the share price in the mid‑£16s, that implies a historic yield of around 2.0–2.2%, lower than BAE’s long‑term average but a reflection of how rapidly the share price has risen relative to the payout. ^[6]

Management expects to return about £1.5 billion to shareholders in 2025 through a combination of dividends and a £500 million share buyback, according to the November trading statement. ^[7]

BAE typically pays two ordinary dividends per year, and sites tracking the stock estimate dividend cover (earnings ÷ dividend) at just under 2x, which is reasonably conservative for a large defence contractor. ^[8]

New contracts and strategic deals driving the order book

The bullish case for BAE Systems in late 2025 is built on a dense pipeline of long‑dated defence programmes across land, sea, air and space. Recent weeks have added several notable contracts.

Bradley A4 upgrade: $390m+ for US Army combat vehicles

In late November and early December, BAE Systems secured a contract modification worth more than $390 million to produce additional Bradley A4 infantry fighting vehicles for the U.S. Army. ^[9]

The funding supports the Army’s multi‑year effort to replace legacy Bradleys with the upgraded A4 configuration, which offers improved mobility, lethality and crew protection. Initial deliveries under this latest phase are due by October 2026, extending revenue visibility for BAE’s land systems business. ^[10]

CV90 infantry fighting vehicles: Denmark adds 44 more

On 21 November 2025, BAE announced a contract with Denmark’s Ministry of Defence Acquisition and Logistics Organisation for 44 additional CV90MkIIIC infantry fighting vehicles. ^[11]

Contract value: roughly $450 million (about €391m) including spares, logistics, support and training.
Strategic angle: reinforces BAE’s position in European armoured vehicles and the broader Nordic CV90 user community.

New Mk 41 missile canister deal with the US Navy

BAE has also secured a $22 million contract from the U.S. Navy to supply additional Mk 41 Vertical Launching System (VLS) missile canisters, with options that could take the total value up to $317 million. ^[12]

This follows a much larger $738 million Mk 41 canister award in July 2025 and underscores BAE’s long‑standing role as the main supplier of canisters for Tomahawk, Standard Missile variants, ESSM and ASROC rounds used by the U.S. Navy and allied navies. ^[13]

Space and semiconductors: GlobalFoundries partnership and Space Force win

BAE’s push into higher‑margin space electronics and satellite systems continues:

Space Force missile‑tracking satellites: In June 2025, BAE Systems won a $1.2 billion contract from U.S. Space Systems Command to supply 10 medium‑Earth‑orbit missile warning and tracking satellites for the U.S. Space Force. ^[14]
Rad‑hard chips with GlobalFoundries: In November 2025, BAE and GlobalFoundries expanded their collaboration around the RH12™ Storefront, a design environment for radiation‑hardened integrated circuits produced on GF’s 12‑nanometre FinFET process. This aims to accelerate U.S.‑based production of space‑grade chips, leveraging the 2024 acquisition of Ball Aerospace. ^[15]

These deals deepen BAE’s footprint in space and advanced electronics, areas that typically carry higher margins and long programme lives.

Undersea drones and next‑gen trainers

Beyond headline contracts, BAE continues to feature in two strategically important niches:

Undersea autonomous vehicles: Reporting on the race for underwater drones highlights BAE as one of the major defence primes vying to shape the emerging market for autonomous underwater vehicles (AUVs) that protect seabed infrastructure and track submarines. ^[16]
UK jet trainer bid: Reuters recently reported that BAE has teamed up with Boeing and Saab to offer a T‑7‑based military jet trainer to replace the RAF’s ageing Hawk fleet, with final assembly proposed in the UK. ^[17]

Taken together, the contract flow points to a business embedded across core NATO capability areas: armoured vehicles, naval missile systems, submarines, air combat, and increasingly, space and autonomous systems.

Financial performance: record backlog and upgraded 2025 guidance

2024: record sales and orders

BAE Systems went into 2025 from a position of unusual strength:

2024 sales: about £28.3 billion, up around 14% year on year.
Underlying operating profit (EBIT): roughly £3.0 billion, also up about 14%.
Free cash flow: around £2.5 billion.
Order backlog: a record £77.8 billion, with order intake of £33.7 billion in the year. ^[18]

This backlog covers multiple years of revenue and spans major programmes in submarines, munitions, Eurofighter Typhoon jets and space systems.

First half of 2025: growth continues

Interim results for the six months to 30 June 2025 showed that momentum continued:

H1 2025 sales: about £14.6 billion, up 11% vs H1 2024.
Underlying EBIT: about £1.55 billion, up 13%.
Underlying EPS: roughly 34.7p, up 12%.
Order intake:£13.2 billion, leaving the order backlog around £75–75.5 billion as orders converted to revenue. ^[19]

November 12 trading update: guidance reiterated

On 12 November 2025, BAE issued a trading statement confirming that full‑year guidance raised in July remains intact. Management now expects for 2025: ^[20]

Sales growth:+8% to +10% versus 2024.
Underlying EBIT growth:+9% to +11%.
Underlying EPS growth:+8% to +10%.
Free cash flow:>£1.1 billion.
Cash returns: about £1.5 billion to shareholders via dividends and buybacks.

The company also reported more than £27 billion of orders secured year‑to‑date, including:

Roughly £4 billion for 20 Typhoon aircraft and weapons integration for Türkiye.
About $3.3 billion of awards in electronic systems.
Around $1.7 billion for U.S. combat vehicles.
About £1.1 billion in missile orders via MBDA.
Around £0.9 billion in additional funding for the Dreadnought submarine programme. ^[21]

This all sits against a backdrop of elevated defence budgets in Europe and NATO, with earlier reporting from the FT and others noting that BAE’s order backlog has climbed above £75 billion and that the group has benefited directly from governments’ renewed commitment to long‑term defence spending. ^[22]

What analysts and models say about BAE Systems stock

Consensus rating: still a “Buy”

Across the major data providers, the tone remains broadly constructive:

Investing.com consensus (via recent summaries):
- Around 18 analysts cover the stock.
- Consensus rating:Buy (majority Buys, a handful of Holds and a small number of Sells).
- Average 12‑month price target: roughly 2,120p, with a range from about 1,370p to 2,500p.
- Implied upside: about 30–32% from recent prices in the low‑1,600s. TS2 Tech+1
MarketBeat: Five analysts’ targets average about 1,997p, with a high target of 2,220p and a low of 1,725p, implying around 23% upside from a reference price of 1,624p. ^[23]
TipRanks: Another aggregation of five broker targets shows an average of roughly 2,090p, with a high near 2,499p and a low around 1,539p, suggesting about 27% upside from prices in the mid‑1,600s. ^[24]
ADR and OTC tickers:
- For U.S. investors, the BAESY ADR is rated around “Hold” on average, with an average target in the low $100s according to MarketWatch. ^[25]
- OTC ticker BAESF shows an average target around $27–28, with an upper estimate in the low $30s, according to Moomoo’s forecast page (where accessible). ^[26]

Across these sources, the structure is consistent: consensus upside of 20–30% over 12 months, but from a base that has already rerated sharply.

Valuation: premium multiples, but “undervalued” on some models

Different research houses frame BAE’s valuation differently:

Simply Wall St:
- Uses a discounted cash‑flow (DCF) model that implies a fair value around £20.79 per share, roughly 22% above current prices.
- Concludes that BAE is “undervalued by 21.9%” on this basis.
- Notes a current P/E of about 24.5x earnings versus a “fair” P/E ratio of ~29.9x, again suggesting some valuation headroom. ^[27]
Hargreaves Lansdown (HL) research:
- Puts BAE’s forward P/E at around 21–22x, versus a 10‑year average near 14x.
- Estimates a prospective dividend yield of about 2.2%, below the longer‑term average of around 3.8%, because the share price has outrun the dividend growth. TS2 Tech+1
TIKR and other valuation cases:
- TIKR’s analysis (late October 2025) highlights that BAE’s share price has climbed over 300% in the last five years, supported by an order backlog approaching £75 billion (more than 8x annual sales). ^[28]
- Their base‑case scenario, using moderate assumptions for revenue growth and margins, suggests more modest but still positive annualised returns from here.

So, there’s a split in the valuation narrative:

Pro‑BAE camp: argues the premium multiple is justified by record orders, high visibility on multi‑decade programmes, exposure to submarines, fighters, missiles and space, and a strong balance sheet that can support ongoing dividend growth and buybacks. ^[29]
Cautious camp: worries that after a 200–300% multi‑year run, future returns could be more pedestrian, particularly if defence budgets normalise or geopolitical tensions ease faster than expected. ^[30]

Independent commentary on today’s move

Fresh commentary dated 3 December 2025 adds colour:

Simply Wall St’s latest piece, “Assessing BAE Systems After a 40.8% Surge and NATO Defense Budget Tailwinds,” reiterates its view that the stock looks undervalued on a DCF basis despite a 40.8% YTD rise and a recent 13% pullback. ^[31]
The Motley Fool UK argues that after a 22% drop from recent highs, the shares may once again represent “a bargain hiding in plain sight,” though that is an opinion piece rather than formal research. ^[32]

Key risks and what to watch next

Even supporters of the stock flag several risks that could derail the bullish case.

Political and budget risk

BAE’s fortunes are directly tied to defence budgets:

Reuters recently highlighted that BAE sees sustained global demand, but also warned of potential delays to funding and payments if the U.S. government shutdown drags on. ^[33]
Talks between the UK and EU over Britain joining the EU’s new SAFE defence fund collapsed in late November. While Reuters reported that the breakdown had little immediate impact on shares of firms such as BAE, it underscores the political complexity around European defence industrial policy and local‑content rules. ^[34]

Peace deals, shifting alliances or fiscal squeezes could also pressure defence budgets, particularly in Europe.

Execution and programme risk

BAE is now embedded in many technically complex, multi‑year programmes:

Major naval and air projects (Type 26 frigates, Dreadnought submarines, Typhoon agreements with Türkiye, and the Global Combat Air Programme) carry long timelines and political oversight. ^[35]
The new Space Force satellite contract and expansion into rad‑hard semiconductors involve cutting‑edge technology and integration of the Ball Aerospace business. Execution hiccups could affect margins or reputational standing. ^[36]

Valuation and sentiment

Finally, valuation itself is a risk:

The stock trades at a significant premium to its own history on earnings and dividend yield metrics. TS2 Tech+1
Any disappointment versus guidance, or signs that orders are slowing, could trigger sharp corrections, particularly given the strong run‑up since 2020.

Outlook for 2026 and beyond

Looking ahead, aggregated analyst models suggest:

Revenue growth: around 8% per year over the next few years.
Earnings and EPS growth: low double‑digit annual rates, implying mid‑teens total return potential if valuation multiples hold steady.
Return on equity: trending towards the high‑teens in percentage terms. TS2 Tech+2TS2 Tech+2

Drivers of that outlook include:

Ongoing NATO and European re‑armament and commitments to higher defence spending targets. ^[37]
The ramp‑up of major programmes in submarines, air combat, munitions and space. ^[38]
The integration of Ball Aerospace and expansion into space electronics and semiconductors, which could structurally lift margins if executed well. ^[39]

For now, guidance from the company and the bulk of sell‑side research still point to high single‑digit to low double‑digit profit growth from a very large base, supported by a record order book and a capital return policy that mixes a progressive dividend with buybacks.

Bottom line: a high‑quality defence giant with mid‑term upside — and high expectations

As of 3 December 2025, BAE Systems stock sits at the intersection of three big forces:

A defence spending super‑cycle that has filled its order book to record levels and underpinned strong earnings growth. ^[40]
A premium valuation that reflects investors’ willingness to pay up for that visibility and “defensive growth” but leaves less margin for error. TipRanks+3TS2 Tech+3Simply Wall St+3
A recent share price pullback that has reopened the debate over whether the stock is again attractively priced, or simply pausing after a long climb. ^[41]

Most consensus models still see 20–30% upside over the next 12 months, supported by fresh contracts, a growing dividend and multi‑year visibility on revenue. But after such a strong multi‑year rally, future returns are likely to be more sensitive to execution, political risk and any change in the global security backdrop.

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