Will 2014 Results Keep BAE Systems plc Ahead Of Rolls-Royce Holdings PLC And Cobham plc?

We’re into full-year results season for our FTSE 100 aerospace and defence firms, and with government spending still a little depressed in much of the world, which company is looking like the best bargain right now?

BAE Systems (LSE: BAE)(NASDAQOTH: BAESY.US) has long been a favourite of mine, and it is due to deliver full-year results on 19 February. But how does BAE stack up against Rolls-Royce Holdings (LSE: RR)(NASDAQOTH:RYCEY.US) and Cobham (LSE: COB)?

Here’s a snapshop of the three companies:

Company BAE Systems Rolls-Royce Cobham
2013 EPS
42.0p 65.6p 21.6p
2013 EPS Change
+8% +10% -4%
2013 Dividend Yield
4.6% 1.7% 3.5%
2013 Dividend Cover
2.1x 3.0x 2.2x
2013 P/E 10.4 19.4 12.7
2014 EPS 37.7p 65.6p 19.7p
2014 EPS Change -10% 0% -9%
2014 Dividend Yield 3.9% 2.7% 3.1%
2014 Dividend Cover 1.8x 2.8x 1.9x
2014 P/E 13.9 13.3 16.8
2015 EPS 42.6p 61.2p 21.8p
2015 EPS Change +7% -7% +11%
2015 Dividend Yield 4.1% 2.5% 3.4%
2015 Dividend Cover 2.0x 2.6x 1.9x
2015 P/E 13.0 15.3 15.2

Rolls-Royce figures for 2014 are based on full-year results just released on 13 February, while BAE and Cobham’s 2014 figures are based on current forecasts, with Cobham not due to report until 6 March.

Rolls sales fall

Rolls-Royce actually beat earnings forecasts slightly, but there’s a bigger dip in EPS now expected for 2015 after the company reported its first sales fall in 10 years and warned that low oil prices are leading some customers to cut back on their spending plans.

But forecasts for BAE have been gaining ground in recent months and there’s now a modest 10% fall in EPS expected for the year just ended, with results due on Thursday. The earnings dip is down to the nature of payments for long-term contracts, and we should see growth again this year and next if forecasts prove accurate.

BAE’s dividends, along with the other two, are still ticking along nicely, and BAE’s yields are falling simply because the share price has been climbing — it’s up 19% over the past 12 months, to 520p as I write.

Good income stock

But we’re still on for a 3.9% yield for 2014, rising to 4.1% this year, and that’s pretty nice for a sector that’s suffering a little.

Cobham is looking promising too, with strong EPS forecasts for this year and next after an expected 10% dip for 2014 — we’ll hear when we get results next month.

Of these three, I still rate BAE as my favourite, and I’m hoping for no unpleasant surprises from this week’s results.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.