As Rolls-Royce gets set to report H1 results, investors will be hoping that the worst is in the past after a torrid 2020 which led to a full-year loss of almost £4 billion. IG’s Victoria Scholar looks at the chart.
Rolls-Royce set to report H1 - where next for the shares?
Rolls-Royce gets set to report 2021 half year (H1) results on Thursday 5 August. In March the aircraft-engine maker announced a full-year (FY) loss of almost £4 billion, swinging from a profit of £583 million in the previous year. Investors will be hoping that the worst is behind Rolls-Royce, which suffered a sharp drop in revenues during the Covid-19 pandemic.
Rolls-Royce undertook a massive restructuring plan, cutting 9000 jobs and raising cash from investors through a rights issue and extra borrowing. It also sold off parts of the business worth £2 billion.
According to UBS, it will 'likely be another difficult set of results'. Earnings before interest and tax (EBIT) are forecast to come in at a loss of £129 million, that’s a major improvement from last years £1.67 billion loss but remains in the red.
Despite this, analysts at Citi are still optimistic on Rolls-Royce. In July the analyst team wrote the shares offer ‘significant long-term value’, providing a buy rating on the stock. Citi added, 'We do not know when the wide body market will recover, but we do believe it will. When it does, we expect Rolls-Royce to recover faster (as it has more new deliveries adding to the fleet and fewer old aircraft being retired).'
Source: IG charts
Rolls Royce share price technical analysis
After a multi-year period of declines for Rolls-Royce, October marked the start of a countermove with shares rallying more than 340% from the trough to the peak in December. However, since then, losses have come back into play with a descending trendline marked by lower lows and lower highs. Shares have given back nearly 25% since the 2020 highs, breaking below psychological round number support at 100p.
Since mid-July the stock has been attempting to regain ground once again pushing back above 100p with the next resistance level in sight at the 23.6% Fibonacci retracement level at 109.65p. A break above would penetrate the descending trendline of resistance and might point to the potential for further strength. On the flip side, a break back below 100p might indicate a resumption of the long-term downtrend.
Victoria Scholar | Writer, London
03 August 2021