BAE Systems (BAESY) Stock: Defense Stocks Take Off as Ukraine Gets Fresh Backing

TLDR

• BAE Systems shares soared 14% to £16 per share, hitting a record high following Ukraine summit hosted by UK Prime Minister
• UK announced a £1.6 billion finance deal for Ukraine to buy over 5,000 missiles from Thales Group
• European defense stocks including Rheinmetall (up 18%), Leonardo (up 15%), and other UK defense companies saw sharp gains
• Expectations of increased defense spending are driving stock surges, with UK planning to raise spending to 2.5% of GDP by 2027
• Defense sector rally follows Ukrainian President Zelensky’s meetings with European leaders after his confrontation with President Trump

BAE Systems shares climbed dramatically to an all-time high following a Ukraine summit hosted by UK Prime Minister Sir Keir Starmer.

The defense and aerospace giant saw its stock jump by as much as 19% in Monday morning trading before settling at a 14% gain to £16 per share by 10am GMT.

This impressive single-day performance has helped push BAE Systems shares up nearly 40% year-to-date. The surge came as European leaders gathered to discuss support for Ukraine’s defense needs.

The wider defense sector also enjoyed substantial gains. Engine maker Rolls-Royce followed closely behind BAE on the FTSE 100 index with a 6% rise amid the sector-wide rally.

Sir Keir Starmer pledged during the summit to “develop a coalition of the willing” to defend a deal in Ukraine and guarantee a peace settlement. This commitment appears to have boosted investor confidence in defense contractors.

The UK Prime Minister also announced a £1.6 billion finance package. This deal will allow Ukraine to purchase more than 5,000 missiles manufactured by French defense company Thales Group at its Belfast facility.

The manufacturing agreement for lightweight multirole missiles (LMM) is expected to create 200 jobs in Belfast. This represents one of the concrete outcomes from the high-profile summit.

Ukrainian President Volodymyr Zelensky attended the London gathering alongside French President Emmanuel Macron. Other attendees included outgoing Canadian Prime Minister Justin Trudeau and European Commission President Ursula von der Leyen.

The summit followed Zelensky’s confrontation with President Donald Trump in the Oval Office on Friday. European leaders appeared to rally around the Ukrainian President following that meeting.

Other Defense Firms

Other UK defense companies saw significant price movements on Monday. Defense technology group QinetiQ rose 9% in the FTSE 250, while Babcock International gained 7% and Chemring climbed 4%.

Smaller defense firms also benefited from the positive sentiment. Helmet and gas mask maker Avon Technologies jumped 7%, while sonar and communications specialist Cohort surged 10% on the day.

German defense stocks saw similar gains, with Rheinmetall shares jumping as much as 18% in Frankfurt trading. This latest increase brings Rheinmetall’s year-to-date gain to 86% and its total growth since 2019 to more than 1,300%.

Rheinmetall, Germany’s largest defense firm, manufactures armored fighting vehicles and personnel carriers. The company opened a joint production and repair facility in Ukraine in June 2024 and plans to open a new air defense facility in the country.

Italy’s Leonardo, which manufactures the Eurofighter Typhoon jet and military helicopters, saw its shares climb as much as 15% in Milan. Leonardo stock has gained 65% since the beginning of January.

Analysts suggest these gains reflect expectations of increased defense spending across Europe. Bank of America analyst Ben Heelan noted that raising defense spending targets to 3% of GDP is “becoming the base case for the NATO leaders summit” scheduled for late June.

The UK has already committed to increasing defense spending from 2.3% to 2.5% of GDP by 2027. Germany’s likely next chancellor, Friedrich Merz, has vowed to prioritize European security and continue supporting Ukraine.

Deutsche Bank analysts reported that Leonardo’s 16.8% rise in orders for 2024 exceeded forecasts by 6%. This growth was driven by electronics for defense and security, helicopters, and cyber solutions.

As defense stocks continue their upward trend, investor attention remains focused on upcoming NATO discussions and further aid commitments to Ukraine.