BAE Systems Wins £2.5 Billion Contract


LONDON -- BAE Systems this morning announced details of a £2.5 billion contract with the Government of the Sultanate of Oman for the provision of Typhoon and Hawk aircraft.

Under the terms of the deal, BAE will supply delivery of 12 Typhoon and eight Hawk Advanced Jet Trainer aircraft to the Royal Air Force of Oman, beginning in 2017. The weapons and aviation group will also provide the agreed arrangements for in-service support.

BAE management commented that the contract "builds on a long history of close co-operation between BAE Systems and the Omani armed forces."

The news will be welcomed by shareholders, following concerns over the $600 billion cuts that the U.S. is looking to make from its defense budget over the next 10 years -- BAE's U.S. division contributes more than half of the company's revenues.

The share price dropped 2.3% on early London trading, down 8.10 pence to 339.90 pence at the time of writing. However, it's the strong 5.5% yield that may well attract private investors to the weapons maker, and the fact that BAE is currently trading on 8.5 times earnings. There's also opportunity to move in the growth area of cyber security, while the potential EADS merger -- which was widely thought to favor BAE Systems -- isn't necessarily completely dead in the water...

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