BAE Systems: analyst comments

Following its failed merger with EADS, we've assembled the views of some leading analysts on the prospects for BAE Systems.

Charles Armitage at UBS - BUY: target price 360p(unchanged).

We are not convinced that the failure of this merger will automatically drive BAE Systems into the arms of another suitor - the likely candidates are US defence companies and we believe that they are unlikely to "double up" their defence exposure while there is still sequestration uncertainty (which should be sorted out in the next 3-9 months, for better or worse).

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Sandy Morris at Jeffries - BUY: target price 350p.

The tremendous advantage afforded by hindsight may permit some to question the success of BAE's strategy in the USA, but such implied criticism ignores the fact that BAE's significant US presence means it has more options open to it than most, in our view. The European option appears to have sadly closed again, probably for some time. ...Before the proposed merger, we believed BAE was in a sound position. That most likely remains the case.

Matthew Baust at RBS - No recommendation as a credit analyst.

While BAE stated that it won't look for another partner, there is speculation that the company, with its low price-earnings, strong cash flows and attractive business profile, could still be a takeover candidate, perhaps broken into distinct parts to avoid political hurdles.

Alphavalue - ADD: target price 351.6p (from Reduce 349.8p).

This leaves BAE rather more exposed as the company will need to find an alternative to secure growth in the short to medium term. EADS remains industrially sound and the growth story is still there. Interrogations will concern both managements as is the case when deals of this magnitude fail to go through. Strategies going forward will need to be redrawn, especially in the case of BAE. Finally, shareholders will question whether managements shoul d stay or go.

CM