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BAE Systems says outlook for year unchanged

LONDON, May 7 (Reuters) - Europe's biggest defence contractor BAE Systems said its outlook for the year was unchanged from February, when it forecast an earnings drop of up to 10 percent this year.

The company said on Wednesday that excluding the impact of foreign exchange rates, it was trading in line with its expectations. Agreements in the U.S. over the defence budget pointed to a more predictable outlook than in recent years.

BAE alarmed investors in February when it guided that earnings would fall by 5 to 10 percent in 2014, hit by the combination of U.S. spending cuts and the non-recurring benefit from the settlement of the Salam deal with Saudi Arabia.

In the months since announcing its full-year results on Feb. 20, BAE said it generated 441 million pounds in cash from completing the sale and leaseback of two properties in Saudi Arabia.

(Reporting by Sarah Young; editing by Kate Holton)