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Investing.com - Kepler Cheuvreux downgraded BAE Systems (LON:BAES) Plc (LON:BA) (OTC:BAESY) from Hold to Reduce on Monday, while raising its price target to GBP15.10 from GBP13.50.
The European defense bellwether faces expectations of soft first-half results when it reports on July 31, though Kepler Cheuvreux notes management will likely confirm full-year guidance with limited upside potential versus consensus estimates.
BAE Systems has outperformed its U.S. peers amid a broader rerating of European defense stocks, despite European defense (excluding UK) representing only 10% of the company’s sales.
Kepler Cheuvreux attributes the stock’s price movement not to anticipated growth estimate upgrades but primarily to "forced buying by macro, ESG, and ETF funds," resulting in what it describes as an "inflated P/E" ratio.
The research firm has trimmed its adjusted EPS estimates for BAE Systems to reflect U.S. dollar weakness and higher share counts, noting that share buyback enhancement has been reduced by the higher share price.
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