(Adds CEO comment, analyst comment, share price)
By Sarah Young
LONDON, Feb 18 (Reuters) - BAE Systems, the world'sthird-largest defence contractor by revenue, forecast thatannual earnings would grow by up to 10 percent this year asmilitary budgets recover and demand for cyber and commercialelectronics grows.
The company was buoyed in November when after years of cuts,Britain increased its budget for defence equipment, and it willalso benefit from rising military spending in the United States.
BAE had made cutbacks last year, when it slowed productionof the Eurofighter Typhoon to be able to keep manufacturing itover a longer period, and a wait for another major order for thejet from Saudi Arabia continues.
Saudi Arabia accounts for a fifth of BAE's sales, about thesame as Britain, while just over a third of sales come fromNorth America.
Despite the slowdown in Typhoon production, Chief ExecutiveIan King gave a reassurance on Thursday that BAE expectationsfor further orders of that aircraft remained the same.
"That doesn't change our commitment to these programmes andour view of timing of activity in Saudi," he said, adding thatdiscussions with that customer continued. "Talks are alwaysongoing because we have a relationship which is enduring."
Among other projects, BAE is working on plans to build areplacement for Britain's submarine-borne Trident nuclearweapons system, and it supplies electronics to the U.S.-builtF-35 Joint Strike Fighter (JSF) aircraft.
For 2016, BAE forecast that EPS would grow by between 5percent and 10 percent from the 36.6 pence level it posted forlast year, putting the company on track to meet a marketforecast of 39.7 pence according to Reuters data.
Growth is expected in BAE's cyber and intelligence business,as governments and companies spend more on data security, and onhigher sales from providing aircraft support to the highernumbers of Typhoons now operational.
The company's shares climbed 1 percent to 504.5 pence,outperforming Britain's bluechip market, which was trading 0.5percent lower. Over the last three months since Britaincommitted to higher military spending, the stock has risen 6percent, versus a 5 percent fall in FTSE 100.
"BAE's long-term outlook seems positive - increased globaltension, JSF, Trident Successor - but the main near-termattraction is relative certainty in a nervous market, in ourview," Jefferies analyst Sandy Morris said.
BAE unveiled succession plans earlier this week when itlined up former oil executive Charles Woodburn as heir apparentfor the chief executive's job, naming him the company's newchief operating officer. (Reporting by Sarah Young; Editing by Paul Sandle/MarkHeinrich)