Jump to content

Rolls-Royce poised for strong profit rebound in second half


Recommended Posts

Rolls-Royce on track for significantly improved operating profits.

Rolls-RoyceSource: Bloomberg
 

Written by: Chris Beauchamp | Chief Market Analyst, London
 
Publication date: 

Rolls-Royce on track for significantly improved operating profits.

British engine maker Rolls-Royce is on track to deliver significantly improved operating profits in the second half of 2022, according to forecasts.

The company's major business units are all expected to contribute to the better performance, led by a recovery in commercial aerospace and defence work.

Rolls-Royce's operating profit for the second half of the year will likely come in around £830 million, a major increase from £527 million in the second half of 2021. The gains are being driven primarily by the company's civil aviation segment, where wide-body flying activity has rebounded robustly.

Within civil aviation, Rolls-Royce is forecasting original equipment revenue to climb approximately 7% to £1.4 billion in the second half. More importantly, higher-margin aftermarket service revenue is projected to jump 16% to £2.4 billion. The company is also benefiting from increased business jet engine deliveries.

The defence unit is poised to see its operating profit hit £298 million, as military spending ramps up in Europe and the Middle East amid the conflict in Ukraine. Rolls-Royce is well-positioned to capitalise on demand for defence services, which offer superior margins.

Meanwhile, the power systems division is likely to post a 31% increase in operating profit to £213 million. Growth is expected to be powered by strong gains in aftermarket activity.

Across its major business units, Rolls-Royce is demonstrating an ability to translate increased demand, particularly for high-value aftermarket work, into significantly better profitability. The second half rebound solidifies a recovery story for the company after a turbulent period marked by the pandemic's impact on commercial aerospace.

With its outlook brightening, Rolls-Royce appears on course to continue rebuilding its balance sheet and financial performance. Investors are likely to cheer the better-than-expected profits as a sign of the company's progress in executing its turnaround strategy.

Analyst ratings for Rolls Royce

Refinitiv data shows a consensus analyst rating of ‘buy’ for Rolls Royce with 4 strong buy, 10 buy, 4 hold and 1 sell – and a mean of estimates suggesting a long-term price target of 357.35 pence for the share, roughly 8% higher than the current price (as of 19 February 2024).

Rolls Royve analystSource: Refinitiv

Technical analysis of the Rolls Royce share price

Rolls Royce’s share price remains on track for its August 2018 peak at 379.0p, judging by the swift near 385% ascent it has seen from its October 2022 low.

The British multinational aerospace and defence company’s share price is now grappling with its August 1997 and February 2019 peaks at 341.3p to 344.4p which may short-term, act as resistance.

Rolls Royce Monthly Candlestick Chart

Rolls Royce Monthly CandlestickSource: TradingView

On the daily chart the Rolls Royce share price, which has risen by more than 10% year-to-date, continues to break through resistance and thus advance.

Rolls Royce Daily Candlestick Chart

Rolls Royce Daily CanldestickSource: TradingView

Monday’s rise above the 8 February high at 325.7p is another stepping stone towards the August 2018 high at 379.0p.

While the October-to-February uptrend line at 306.3p underpins, the medium-term uptrend will remain intact.

For long-term bullish momentum to be maintained, the Rolls Royce share price should ideally remain above its mid-December low at 287.3p.

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • I have not been a fan of either of exchanges and wallets native tokens but would wanna explore it now. I took interest from the current hype around BNB, OKB and BGB. These tokens particularly BNB and BGB has shown strength which is obviously due to increase in demand to take part in the most of the launchpool. BNB rose almost 80% in the past 1 year, BGB was on the spotlight with about 190% in a year. OKB may not be left out due to it's potential but has made any significant movement recently. Wallet tokens on the hand have also been doing well but may not be compared to Centralized exchanges imho; I have also monitored few wallet particularly trust wallet and C98 wallet. My best guess is we could be seeing the wallet tokens making impressive price action as we approach post halving due to increase in transactions and I wonder if any one here is considering the prospect BWB token for Bitget wallet. Launching pretty soon and airdrop participation in play. I would appreciate your speculative opinion on it potentials.
    • In the realm of cryptocurrency exchanges, playing by the rules isn’t just a suggestion—it’s a must for staying in the game. Most major centralized exchanges (CEXs) strive to adhere to these regulations, implementing measures to prevent money laundering and illicit activities. However, a recent controversy has emerged with BingX, a top CEX, defying US sanctions by allowing Iranian users full access to its platform. BingX facilitates Iranian Rial trading, directly violating US sanctions. They allow Iranian users to trade cryptocurrencies without KYC verification. This, along with offering peer-to-peer (P2P) transactions using Iranian fiat currency, further raises red flags. This incident is reminiscent of the past troubles faced by giants like Binance, who were caught facilitating transactions for sanctioned individuals, resulting in a $4.5 billion plea deal with US authorities in 2023. The question remains: will this defiance by BingX lead to its downfall? Regulatory bodies in the US, like the SEC or DOJ, might take action.However, the severity of the situation raises questions about the long-term viability of the exchange and whether it may face the prospect of closure or severe penalties for its actions. As governments grapple with the complexities of digital assets, CEXs that prioritize expansion over compliance will likely face increasing scrutiny and potential consequences.  
    • The exchange continues to offers it's  users significant opportunities through its ecosystem products like PoolX and Launchpool. By participating in these platforms, users can benefit from various services such as staking, liquidity mining, and accessing new project opportunities. PoolX enables users to stake their assets and earn rewards through flexible investment options. Launchpool provides users with the chance to participate in early-stage project offerings. Overall, engaging with Bitget ecosystem products can diversify investment portfolios and facilitate exposure to new and promising projects in the crypto space.
×
×
  • Create New...
us