The defence and aerospace giant posted an 8% rise in overall group sales to £17.9bn in 2015, but saw underlying earnings fall 1% to £1.68bn due to previously reported slow sales of its Eurofighter Typhoon fighter jets.
Its bullish outlook comes as welcome cheer after BAE warned in November that 2015 results would be hit by the move to slow jet production, while it also announced up to 371 jobs were being axed.
BAE now expects recovering defence budgets around the world to see its earnings per share rise by between 5% and 10% in 2016.
Britain also increased its budget for defence equipment in November, to £178bn over the next 10 years, while BAE is also expected to benefit from improving military spend in the United States.
BAE chief executive Ian King said the group was well placed to benefit as "defence budgets recover", which comes after a spending squeeze in recent years.
Shares in the FTSE 100-listed firm rose 2% after the results.