London, Jan 8, 2026, 08:40 GMT — Regular session
BAE Systems shares climbed in early London trading on Thursday as European defence stocks hit a fresh record after U.S. President Donald Trump called for a bigger U.S. military budget. BAE was up with peers including Chemring, Italy’s Leonardo and Germany’s Rheinmetall.
BAE Systems (BAES.L) traded around 2,042 pence, up about 6% from Wednesday’s close of 1,926 pence, and near the top of the day’s 2,029-2,055 pence range, according to price data.
The sector move matters because defence spending expectations have become the market’s main input for the group’s near-term earnings narrative, not just its long order pipeline. UK defence names helped lift London’s FTSE 100 to a record this week as investors digested the latest geopolitical jolt and oil-market fallout.
Broker views have been split. Kepler Cheuvreux analyst Aymeric Poulain upgraded BAE to “hold” from “reduce”, while lifting his target price to 1,860p, and said “defensive qualities” could “cap momentum potential” given BAE’s heavy exposure to the U.S. and UK, where he flagged tighter budget maths. Kepler’s note also pointed to currency translation headwinds and discussed BAE’s outlook for adjusted EBIT — earnings before interest and taxes, excluding some one-offs — and “constant currency” growth, which strips out exchange-rate swings. Investing.com
Bernstein analyst Adrien Rabier moved the other way, downgrading BAE to “market perform” and cutting his target price to 1,950p from 2,250p. He called BAE “the highest-quality defense company in Europe” but argued the stock could lag if investors rotate to peers with sharper growth leverage, and said he expected cautious 2026 guidance. Investing.com
Even after this week’s run, BAE is still below its 52-week high and trading volume on Wednesday came in under its recent average, MarketWatch data showed.
The risk for bulls is that the budget headlines fade into process: big top-line numbers can still get reshaped by legislatures, timing and programme choices, while contract awards can slip. Currency moves also matter for reported sales, and a stronger pound can dull the translation benefit of U.S. revenue.
