Investec has highlighted a number of positives to take away from BAE Systems' 2012 results, but has retained its 'hold' rating and 325p target price for the defence group, voicing underlying concerns about the US 'sequester'.

Full-year results were "a little ahead" of Investec's expectations on an an earnings per share (EPS), dividend and cash basis, though revenues came in slightly below forecasts.

The broker said that it should not be making any major changes to operating estimates, though the tax rate guidance for 2013 (at 23-25%) was lower than expected. "As such, forecast EPS looks well underpinned assuming the guidance".

As for the dividend of 19.5p per share, it was covered by two times underlying earnings, a level that the company said it would continue to target. The broker labelled this as a "good guide going forwards".

BAE also announced that it would initiate a £1.0bn share buy-back over the next three years "which is a not completely expected positive", Investec said.

"The share buyback looks warranted and well-timed although short term might be muffled by ongoing US concerns."

While the stock is "cheap" - trading at just 7.6 times 2013 earnings - Investec said that US problems "are looming ever larger".

"If sequestration does happen, then it is very difficult to gauge the full impact on our forecasts for BAE and the other UK defence stocks."

The results were well-received by the market on Thursday, with the stock trading 4.39% higher at 346.8p by 10:32.

BC

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