BAE, QinetiQ could benefit from $95bn US aid package, says JPMorgan

UK-listed defence peers BAE Systems and QinetiQ could both benefit from the recent passing of a $95.3bn US aid package to Ukraine, Israel and Indo-Pacific partners.

On Saturday, the US House of Representatives approved around $67bn in extra spending for military equipment and roughly $29bn for humanitarian aid and other items. The package, which is supported by both the Senate and the president, should be disbursed quickly, JPMorgan said.

"To put this in context, our US A&D analyst Seth Seifman forecasts that the US defence investment budget in fiscal 2024 would be $319bn before this supplemental budget; thus the uplift in spending is very significant," said JPMorgan analyst David Perry.

"We also believe that the supplemental budget shows that the fears by some investors over the future direction of US defence spending may be overdone."

The companies in JPMorgan's European defence coverage with the modest direct exposure to supplementary defence budget are BAE Systems, where 43% of 2023 sales came from the US, QineitiQ (26%), along with Italian aerospace group Leonardo (20%) and German engineer RENK (20%).

BAE and QinetiQ were up both trading more than 1% higher on Monday morning in London – though in line with the wider market.