Britain's largest defense firm, BAE Systems, announced a significant 11% increase in its order backlog, reaching an all-time high by the end of 2024. This comes amid a 14% rise in the company's annual revenue. However, despite these gains, BAE Systems' quarterly figures fell short of market expectations, according to Reuters.
Meanwhile, Dutch healthcare technology group Philips experienced an 8% drop at the market open after failing to meet sales growth expectations for the fourth quarter. The company reported a notable double-digit decline in sales within China, contributing to a net loss of 698 million euros ($729.9 million) for the year, a significant increase from the previous year's loss of 463 million euros. In contrast, Philips reported comparable sales growth of 1% for both the fourth quarter and the full year 2024.
The mixed performance of these major companies came as European markets opened with variability on Wednesday. Investors assessed numerous earnings releases alongside a hotter-than-expected inflation rate in the U.K., which rose to 3% in January, surpassing the 2.8% forecast in a Reuters poll. This economic backdrop contributed to Asia-Pacific stocks trading mostly lower overnight, diverging from Wall Street's momentum, where the S&P 500 closed at a record high on Tuesday.
BAE Systems' CEO Charles Woodburn expressed confidence in the company's future prospects, citing the substantial order backlog and the resilience of its business model.
"Based on the exceptional visibility of our record order backlog and sustainability of our value-compounding business model, we remain confident in the positive momentum of our business into the future." – CEO Charles Woodburn
Looking ahead to 2025, BAE Systems anticipates a modest 1%-3% growth in comparable sales, although it expects a mid- to high-single-digit decline in China. The company foresees increased global defense budgets driving demand and anticipates Europe will focus on enhancing its defense production capabilities.
Equity analyst Matt Dorset from Quilter Cheviot highlighted structural tailwinds favoring BAE Systems due to rising global defense spending.
"We continue to see structural tailwinds supporting BAE, driven by increased global defense spending." – Matt Dorset, equity analyst at Quilter Cheviot
In contrast, Philips faced significant challenges in China, where consumer demand recovery remains uncertain. Despite an operating profit increase of 4% to £2.69 billion ($3.39 billion) over the period, Philips CEO Roy Jakobs acknowledged the unpredictability surrounding Chinese demand recovery.
"We believe [Chinese demand] will come back, long term it's attractive, but we're just not sure when it's going to happen and when it's going to hit that inflection point." – Philips CEO Roy Jakobs
Philips' disappointing performance was further reflected in its mixed financial results. While the company achieved an operating profit rise, its net loss widened significantly over the past year. The broader European market context saw the Stoxx 600 index outperforming with a 3.3% rise in February, surpassing the S&P 500's 1.25% gain.