It has been a stellar two years for defence business BAE Systems (BA.), among the very best periods in the company’s history. The war in Ukraine and other tensions around the world have acted as a spur for global governments to invest in their military capability and BAE has positioned itself in the right areas to take advantage.

This has been rewarded by the market and means there is little margin for error when the company reports its full year results on 21 February. At £12.17 the shares trade on 18.1 times consensus 2024 earnings.

Investment bank Berenberg had pretty high hopes for these numbers when it previewed them just before Christmas, analyst George McWhirter expecting a strong outcome after the upgrade to guidance the company delivered at the half-year stage. He thinks this will be sustained by a robust showing in its maritime division.

McWhirter is also positive on the medium-term future for the business: ‘We think BAE is well placed to deliver 10% earnings per share compound annual growth over the mid-term.

‘The building blocks are a combination of mid-to-high single-digit organic revenue growth, steady margin expansion and low single-digit accretion from the ongoing share buyback.’

Commentary on the extent to which rising military budgets are feeding into contract awards could well hold the key to the market’s reaction to BAE’s looming update. 

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