Here is why the price of Bae Systems shares simply exploded 17% to a historical maximum!

He BAE systems (LSE: Ba.) The price of the shares shot 17% higher today (March 3) to reach 1,642p. The entire European Defense sector is emerging, including Rolls-Royce Stock, which rose 6% and approached 800p!

Bae has now risen 30% in 2025, classifying it between the Ftse 100The best performance actions to date. Here's why you are flying taller.

Paradigm change

On February 28, President Donald Trump met with Ukrainian President Volodymyr Zelenskyy in the White House to discuss a mineral agreement and the end of the war with Russia. To say that it was not good would be a euphemism.

After this, Trump's supporter, Elon Musk, even expressed his support publicly to UU. UU.. It is not necessary to say that all this has deep ramifications for European security.

At the Ukraine Defense Summit organized by Keir Starmer during the weekend, NATO and European leaders agreed to reinforce defense support for Ukraine and emphasized the urgent need for Europe to rear. The president of the European Commission, Ursula von der Leyen, explicitly declared that the budgetary rules could adapt for that to happen.

Meanwhile, a Reuters report says that the incoming German government is considering a defense fund. This is a great change. Famous under the mandate of Von der Leyen as a minister of defense of Germany, reports of German soldiers who use brooms instead of machine guns during NATO exercises arose due to the serious scarcity of equipment.

Bae's executive president Charles Woodburn recently called this a “paradigm change“I don't see that comment like exaggerated.

For European defense companies such as BAE, it is likely that tens of billions of pounds and euros of contracts are at stake.

Solid growth

Last year, the company reported sales of £ 28.3 billion, and the accumulation of orders grew 11% to a record of £ 77.8 billion. By 2025, he expects sales to increase by 7%-9%and underlying profits per share will increase 8%-10%.

But that guide was before last week's events. Investors probably expect a two -digit increase in income and earnings now.

As for the dividend, that rose to 10% last year, and analysts expect a 9% increase this year, then 10% in 2026. Although no dividend is guaranteed, prospective payments are covered more than twice for prognosis profits.

However, after the solid recovery of the price of the shares, the performance forward is only around 2.2%.

What could go wrong?

While Europe faces the reality of rearming, the United States is looking to reduce its military budget. That could be a risk to BAE's request, especially because the United States is currently its largest market.

In addition, Saudi Arabia is an important buyer of BAE teams (such as Typhoon combat aircraft). However, he has strengthened defense ties with China and Russia. If Saudi Arabia moves away from the western suppliers, BAE's income of the region could decrease.

Should I buy the shares?

We all want peace in Ukraine. But unfortunately, that will not change the reality that the international order based on rules led by the United States, based on international law and multilateral institutions after World War II, seems to be collapsing. Two immediate consequences of this are growing instability and greater military expense.

I invested in Bae shares in 2022 to 819p, then again at 1,158p just before Christmas. But now about 24 times earnings is quoted, which I think is quite high. Therefore, I will wait for falls before considering buying more actions.