Shares digital

BAE Systems (BA.) 481.25p

The defence and aerospace group has reported a 22% rise in underlying profit to £1.48 billion for 2007. (Read the full story: www.sharesmagazine.com/node/3314)

Shares says: BAE has good earnings visibility and profit was better than expected, but the aerospace and defence sector’s glory days could be over. There’s concern over the Department of Justice’s probe into alleged bribery by BAE relating to Saudi operations. The Ministry of Defence is facing severe budget pressures on the back of expensive operations in Iraq and Afghanistan. So defence projects are likely to be delayed or even cut. The US defence budget will certainly see significant changes once a new president is sworn in next January. The industry has grossly underperformed the FTSE All Share in 2008 to date and investors are starting to look elsewhere for value. Don’t hesitate about taking some profit on BAE Systems if you don’t like the outlook. TAKE PROFIT

Telegraph says: Casting an eye over BAE Systems results, it would be hard to believe that, just a few years ago, respected commentators wondered if the company could survive at all. Those mishaps seem a long time ago after BAE posted £1.2 billion profit, nearly a third higher than 2006 and above expectation. Chief executive Mike Turner, who will step down later this year, will be able to look back on an achievement of leaving BAE in its best shape for years. BUY

The Times says: The likelihood of cutbacks in British defence programmes may hurt sentiment but should not be overplayed at a time when sales from Saudi Arabia are beginning to gather momentum. Meanwhile, US defence spending seems assured for the next two years at least. That means the only puzzle is why the shares barely budged. With earnings forecast to rise 17% this year and 13% next, a forward earnings multiple of 13 times is too low for such defensive growth. BUY