After a somewhat decent return in 2016 (+14% price performance), BAE Systems is helped by Bank of America Merrill Lynch which reiterated its Buy rating on the stock, with a raised Price objective of 690p. « The favourable outlook for defence spending should provide good support to earnings growth and cash generation into the medium term for BAE. In this context we believe valuation is attractive. We expect the group’s pension liability to benefit from higher yields at the FY16 results, and highlight in a simulation that BAE could see mid to high single digit positive EPS revisions on US corporate tax reform. Our PO moves to 690p as we roll over our EV/EBITA multiples to 2018-19 », write Merrill’s analysts in a report dated Jan 9.