BAE Systems and Rolls-Royce earnings preview: aerospace and defence giants face high expectations
BAE reports on 12 November and Rolls-Royce on 13 November, with both companies' exceptional share price performance raising the bar for upcoming results.
Exceptional outperformance raises expectations
BAE Systems' third quarter (Q3) sales and revenue release is expected on Wednesday 12th of November and Rolls Royce's a day later.
With both companies' share prices outperforming the FTSE 100 by a large margin, investors will want to know whether this trend may last until year-end and beyond.
BAE Systems and Rolls-Royce comparison chart
Year-to-date the BAE Systems share price has risen by 59% but over the past five years it gained 294% on a total annualised return basis and 357% on a total return (by re-investing dividends) basis.
BAE Systems 5-year total return graph
For Q3, BAE is expected to report revenue of £16.1 billion, a 7.8% year-over-year (YoY) rise, pre-tax profit of £1.56 billion, up 30.6%, and earnings per share (EPS) of 41.40 pence, up 13.1%.
Rolls-Royce has delivered even more dramatic returns, with the share price up 95% year-to-date and gaining 975% over five years on a total annualised return basis.
BAE Systems capitalises on elevated defence spending
BAE Systems enters its next reporting cycle with a backdrop of elevated geopolitical tension, strong order intake, and an attractive backlog that lends good visibility to future earnings.
In its late July update the company revised its outlook upward - indicating that sales growth is expected at 8-10% (versus its prior 7-9%) and underlying profit growth at 9-11% (up from 8-10%).
This upward revision reflects rising defence budgets globally as governments respond to geopolitical uncertainties with increased military spending.
Drivers for the upcoming earnings report will include how effectively BAE is converting its backlog into revenue and profit, and the margin trajectory in its platforms & services divisions (naval, munitions, cyber, aerospace), and interplay of foreign-exchange and inflation/cost headwinds on its supply chain.
Execution and cost control remain critical
Given the big order book, the market will watch for commentary on delivery schedules, programme risks (especially for large defence contracts) and how BAE is managing working capital and capital investment.
On the risk side, rising costs (labour, raw materials, energy), delays in major programmes and any change in defence budgets (especially in key markets like the US, UK and Middle East) could weigh.
The upcoming results provide a chance for BAE to demonstrate whether it can sustain its growth momentum in a favourable demand environment, or whether execution and cost control will limit upside.
Rolls-Royce transformation drives exceptional returns
Rolls-Royce Q3 expectations include revenue of £10.55 billion, a 9.2% YoY rise, pre-tax profit of £1.23 billion, down 2%, and earnings per share (EPS) of 12.86 pence, up 14.6%.
Year-to-date the Rolls-Royce share price has risen by 95% but over the past five years it gained 975% on a total annualised return basis and 989% on a total return (by re-investing dividends) basis.
Rolls-Royce 5-year total return graph
Rolls-Royce steps into its next earnings with the tailwind of a strong first half: the company announced in July that underlying revenues grew by double-digits and that operating profits surged around 50%.
As a result, Rolls-Royce upgraded its full-year guidance, signalling growing confidence in its civil-aerospace, defence and power-systems businesses.
For the upcoming result, key areas of focus will include the civil-aerospace segment (particularly wide-body engine flying hours which contribute high margins), the pace of margin recovery, free cash flow generation and how supply-chain issues are evolving.
Turnaround sustainability under scrutiny
Since Rolls has flagged strong performance and a step-up in its transformation under Chief Executive Tufan Erginbilgic, the market will look for evidence that this turnaround is both sustainable and scalable.
Moreover, the buy-back or shareholder-return narrative has become more prominent - the company at the beginning of the year announcing a £1 billion share-buy-back and reinstated dividends.
On the caution side, Rolls Royce faces the challenge of maintaining strong margins into the second half: the company has indicated that while the first half delivered exceptional improvement, the second half may see some pressure due to increased investment and a slightly weaker net contractual margin uplift.
With its share price already near all-time highs and market expectations elevated, Rolls Royce will be under scrutiny for its forward guidance - specifically whether the upgraded full-year targets are credible, and if cash generation remains robust.
Comparative sector dynamics
Both companies operate in sectors tied to national defence, aerospace, and global macro-trends (e.g. defence spending, aircraft utilisation, supply chain constraints). But the narrative differs significantly.
BAE is positioned to capitalise on a favourable demand environment but must manage costs and execution risks across complex, long-duration programmes.
Rolls Royce, by contrast, is in the midst of a turnaround and must demonstrate its transformation is delivering sustainably rather than representing one-off improvements.
From an investor standpoint, both sets of results will offer insight into how strong demand remains in defence and aerospace, how inflation, labour and supply-chain pressures are being managed; what the margin and cashflow outlooks look like; and how each company is positioning itself for the medium term.
Analyst ratings and technical analysis
Fundamental analysts rate BAE Systems and Rolls-Royce as a ‘buy’.
According to LSEG Data & Analytics, analysts have a long-term mean price target at 2,085 pence - around 14% above the current share price - for BAE Systems and 1,171 pence - 2% above the current share price - for Rolls-Royce (as of 8/10/2025).
BAE Systems LSEG Data & Analytics chart
Rolls-Royce LSEG Data & Analytics chart
BAE Systems has a TipRanks Smart Score of ‘4 Neutral’ but is nonetheless rated as a ‘buy’ whereas Rolls-Royce has a TipRanks Smart Score of ’10 Outperform’ and a ‘buy’ rating.
BAE Systems TipRanks Smart Score chart
Rolls-Royce TipRanks Smart Score chart
Despite its strong year-to-date performance, the BAE Systems share price has given back around 12% from its 2,073 pence early October record peak.
In case of the early November low at 1,788p giving way, the area between the March 1,728p high and the August 1,675p low may be revisited. Further down lies the mid-May trough at 1,621.5p which may also be reached in case of a deeper correction being witnessed.
While the BAE Systems share price remains above its 1,675p August low, the longer term uptrend will be deemed to be intact. On a rise above the 22 October high at 1,912p the July peak at 1,940p may be revisited. Further up the June high at 1,998.5p and the psychological 2,000p region represent additional possible upside targets.
BAE Systems daily candlestick chart
The Rolls-Royce share price is once again trying to grapple with its 1,196p September record high but first needs to overcome its 1,181.5p late October high in order to do so.
Rolls-Royce daily candlestick chart
Immediately bullish momentum should be maintained while the mid-October low at 1,087p underpins. While this remains the case, the odds favour a new all-time high being hit before year-end with perhaps the 1,300p region being eyed.
A fall through the 1,087p mid-October low may provoke a deeper correction with the July-to-August gap at 1,026p-to-1,003.5p being filled in this scenario.
Investment considerations for aerospace and defence
For investors considering exposure to UK aerospace and defence through BAE Systems or Rolls-Royce, the upcoming results provide crucial tests of different strategic approaches.
- Research both companies' strategic positioning, order books, and operational challenges to understand the distinct investment propositions they offer.
- Consider how defence spending trends, aerospace recovery, and execution risks might affect sector performance.
- Open an account with IG by visiting our website and completing the application process.
- Access UK aerospace and defence stocks through our trading platform.
- Consider appropriate risk management given the elevated valuations and high expectations already embedded in share prices.
Share dealing provides direct exposure to both companies' growth stories for long-term investors.
Spread betting and CFD trading offer flexible approaches for trading around earnings.
An outperforming result from either could provide a catalyst, whereas any signs of weakening demand, margin squeeze or cash-flow deterioration could prompt increased scrutiny.
Important to know
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Connect with us
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Professional clients trading spread bets and CFDs can lose more than they deposit.
Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. They’re not suitable for most investors. Before you invest, you should consider whether you understand how options and futures work, the risks of trading these instruments and whether you can afford to lose more than your original investment.
Trading stocks and shares ‘on margin’ within a US options and futures account – meaning that you only finance part of the cost of acquiring a position in a security – carries additional risks over buying securities on a fully funded basis and may result in losses exceeding your original investment. Trading on margin will also result in additional costs to you as the investor and any securities purchased using margin may be held as collateral by the lender, restricting both your rights as shareholder, and your ability to use the securities until the margin trade is closed. You should familiarise yourself with these risks before trading on margin.
The value of shares, ETFs and other ETPs bought through a share dealing account, a US options and futures account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Some ETPs carry additional risks depending on how they’re structured, investors should ensure they familiarise themselves with the differences before investing.
Share dealing and IG Smart Portfolio accounts provided by IG Trading and Investments Ltd, CFD accounts and US options and futures accounts are provided by IG Markets Ltd, spread betting provided by IG Index Ltd.
IG is a trading name of IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764), IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. IG Markets Ltd (Register number 195355), IG Trading and Investments Ltd (Register Number 944492) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
The information on this site isn’t directed at residents of the United States, Belgium or any particular country outside the UK and isn’t intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
