The last year was brilliant for both BAE systems (LSE: BA.) I Rolls-Royce (LSE: RR) Actions. But what about the next 12 months?

. FTSE 100 The heroes of Defense and Aviation have increased by 41% and 121% respectively over the past year. Within five years they climbed 270% and humorous 1 240%.

Postpandemical recovery in civil aviation gave Tufan to CEO Transformatic Rolls, Erginbilgiç a great start, when he took power in January 2023. It is uncomplicated to forget about Rolls-Royce also defense, although Bae is a specialist. Geopolitical fears have increased the sector. Germans and others pump cash in restart. It is probably now priced.

FTSE 100 Warhorses

Both companies published half a year of results last week. On July 30, Bae Systems recorded a 11% sales jump to 14.6 billion GBP, and EBIT raised 13% to 1.6 billion GBP. The consumption of the order slightly dropped to 13.2 billion GBP, from 15.1 billion GBP last year.

Actions have released recently, but I still see a lot of long -term potential. Defense agreements take up years, and this also means years of revenue visibility. Useful for investors taking a long -term approach.

The next day Rolls-Royce broke his expectations. Again. At the basis of the operating profit, it increased by 50% to 1.73 billion GBP, because revenues increased by 13% to 9.06 billion GBP. Free cash flows have increased to 1.58 billion GBP. Civil Aerospace increased by 17% to 4.79 billion GBP. Power systems increased by 20%. The only sluggish piece was defense, only 1%. Actions increased by another 10% during the day.

Earnings, growth, cash flows

However, there is a risk. The biggest would be a very desirable unexpected peace agreement. Unlikely, but not impossible. Another is fiscal. European governments can promise more weapons, but they can fight for permission for them.

Both companies are also in the face of obstacles specific to the company. In the case of bae, risk is stagnation of order consumption. It is already slightly down and may not recover if politicians delay huge projects or pull the rates of NATO expenditure goals.

Expectations regarding the height of the sky are a problem for Rolls-Royce. A duel of growth can cause a strenuous reset. As a producer of air engines, Rolls is exposed to market variability because the airlines sector can be shaky.

What analysts expect

So where could 10,000 pounds invest today next year? Sixteen analysts forecast the annual target median price of 2.107 pence for BAE systems, compared to today’s 1,813.5 pence. This is a forecast profit of 16%, which can bring an investment of 10,000 GBP to 11,600 GBP. Not bad at all.

Twelve analysts forecast the median price of 1048 pens for Rolls-Royce, i.e. 1.6% below today’s 1,069.5 pens. This would reduce £ 10,000 to 9,840 £. Star results are probably preliminary last week. But they don’t surprise me either. I just don’t know how long Tufan Turbo, how he is now known, can maintain its speed.

Rolls-Royce has two fresh growth options in miniature nuclear reactors and engines for narrow bodies. If he overcomes them, it may boost even higher. Trade in price to profit (P/E) of 52.8, the air becomes slim there.

I think BAE systems look more stable. This is not inexpensive with P/E 26.3, but it is well managed and anchored in long contracts. It is worth considering.

Rolls-Royce can be more unstable. Thanks to market capitalization worth 90 billion pounds, shares are unlikely to double the following year. Even miracles have a warning. But now you can’t ignore.