BAE Programs (LSE: BA.) shares have been having a little bit of a breather not too long ago — they’re principally flat over the previous six months. Zooming out a bit additional although, they’re up 47% in two years and 120% over three. That simply tops the broader FTSE 100.

Yesterday (19 February), we acquired the defence large’s full-year 2024 outcomes, which had been strong. So, ought to I purchase extra shares for my ISA? Let’s focus on.

Sturdy development and big order backlog

Final yr, BAE’s gross sales jumped 14% to £28.3bn, whereas underlying revenue grew by the identical proportion to simply over £3bn. Underlying earnings per share (EPS) elevated 10% to 69.5p.

A last dividend of 20.6p was declared, taking the whole for 2024 to 33p — a rise of 10%. Nevertheless, because of the robust share price appreciation in recent times, the forward-looking dividend yield right here is simply 2.65%. That’s under the FTSE 100 common.

The corporate additionally repurchased 43m of its personal shares. Mixed with dividends, that noticed it return practically £1.5bn to shareholders all year long.

CEO Charles Woodburn commented: “We’re supporting our customers around the world, while shaping our portfolio towards higher growth and strategically important markets… Based on the exceptional visibility of our record order backlog and sustainability of our value-compounding business model, we remain confident in the positive momentum of our business into the future.”

Talking of that file order backlog, it’s now reached a gargantuan £77.8bn. That’s 11% — or £8bn — greater than the beginning of 2024, and practically 3 times the agency’s annual income!

Looking forward to 2025, BAE expects gross sales to extend as a lot as 9%, with earnings rising 8%-10%.

Paradigm shift

On the latest defence summit in Munich, European political leaders agreed that they should spend extra on defence. US President Donald Trump has gone additional, saying that NATO members ought to spend 5% of GDP on defence, slightly than the present goal of two%.

However grasp on. Europe isn’t any hotbed of excessive financial development. So how wouldn’t it afford this? Effectively, European Fee President Ursula von der Leyen proposed exempting defence expenditures from EU finances constraints, thereby artificially creating room for additional spending.

In line with Reuters, Deutsche Financial institution analysts say that correcting 10 years of underspending by NATO members will price €800bn!

Clearly this can be a huge long-term alternative for BAE, as Europe is for certain to deal with enhancing its personal defence manufacturing capabilities. Chief govt Woodburn known as it a “paradigm shift“.

Certainly, one potential problem I see right here is that BAE could wrestle to scale rapidly sufficient as a consequence of capability constraints and a scarcity of expert employees, doubtlessly limiting its development alternatives. Nevertheless, administration reckons such challenges will be overcome, and is already having “high-level” conversations with governments about demand.

One other threat right here is the US authorities effectivity drive led by Elon Musk, which might result in defence cuts and diminished alternatives for BAE throughout the pond.

My transfer

I first purchased BAE shares in 2022 at 819p, then added on a dip at 1,158p in December final yr. Now at 1,317p, the inventory is at present buying and selling at 19 instances earnings, which is cheap in comparison with international friends.

For buyers on the lookout for a defence inventory to purchase, I feel BAE is value contemplating. Weighing issues up although, I’m proud of my very own place measurement for now.