Investec highlights headwinds for BAE Systems as guidance disappoints

19th Feb 2015 09:46

Investec has kept a 'sell' stance on BAE Systems after the defence contractor's 2014 results and 2015 guidance came in below forecasts, saying the company faces a "number of headwinds" in the future.BAE sales annual revenues fell 8.6% to £16.6bn while operating profits declined 12% to £1.70bn, with results coming in around 2% behind consensus expectations, Investec said.One positive though was that net debt grew only to £1.0bn from £0.7bn, much better than the £1.8bn consensus forecast.Nevertheless, the company's guidance suggests operating profits of around £1.77bn for 2015 which is 2% below analysts' estimates ahead of the Thursday's results."Modest improvement in the US from 2016 and weaker sterling will probably not be sufficient to mitigate a number of headwinds to BAE's profits and cashflow," Investec said.The broker said anticipated UK defence budget cuts following the elections and Strategic Defence and Security Review, potential delays to export orders, and growing net debt and pension liabilities "could limit future shareholder returns".The stock was up 0.1% at 552.5p by 11:25, compared with Investec's 440p target price.