Rolls-Royce Holdings (RR) AI Stock Analysis

• Market Cap: £100.11B
• Dividend Yield: 0.91%
• Average Volume (3M): 33.96M
• Price to Earnings (P/E): 16.6
• Beta (1Y): 1.19
• Revenue Growth: 9.62%
• EPS Growth: 146.74%
• Country: UK
• Employees: 42,400
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): 0.14
• Shares Outstanding: 8,412,742,000
• 10 Day Avg. Volume: 32,951,556
• 30 Day Avg. Volume: 33,957,093
• PEG Ratio: 0.13
• Price to Book (P/B): 35.50
• Price to Sales (P/S): 4.56
• P/FCF Ratio: 25.71
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: £1,407.37
• Price Target Upside: 18.27% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 10
• EPS Forecast (FY): 0.36
• Revenue Forecast (FY): £22.30B

• Rating: 76 Outperform
• Price Target: 1,345.00 p ▲(13.03% Upside)
• Action: Reiterated Date: 03/01/26
• Date: Action: Reiterated 03/01/26

The score is driven primarily by improving fundamentals (profitability and free cash flow rebound) and a constructive technical uptrend, reinforced by upbeat guidance and shareholder return commitments from the latest earnings call. The main constraint is balance-sheet leverage/recency of negative equity, with valuation appearing fair rather than clearly discounted and the dividend yield modest.

Positive Factors

Profitability turnaround & margin expansion

Rolls‑Royce’s revenue and margin recovery is durable evidence of improved operating leverage and pricing/contract mix. Higher 2025 margins and accelerating revenue increase the company’s ability to self‑fund maintenance R&D and reinvest in service capacity, strengthening long‑term earnings quality and resilience.

Strong cash generation and FCF alignment with earnings

Substantial uplift in operating cash flow and high FCF conversion indicates earnings are being converted into real liquidity. This supports sustainable investment in aftermarket capacity, funds deleveraging or shareholder returns, and reduces dependence on external financing over the medium term.

Recurring aftermarket revenues from long‑term service agreements

A large installed base plus LTSA and through‑life support contracts delivers predictable, higher‑margin recurring revenue. That structural aftermarket cash flow smooths cyclical new‑engine sales volatility, improves revenue visibility over multi‑year horizons and enhances customer lock‑in.

Negative Factors

Elevated leverage and recent negative equity history

Meaningful debt and a recent return from negative equity limit balance‑sheet flexibility; refinancing, large program investments or cyclical downturns would strain capacity. Elevated leverage increases funding cost sensitivity and constrains strategic optionality versus less‑levered peers.

Cash‑to‑debt coverage remains modest

Even with strong absolute FCF, the ratio of cash generation to debt implies a slow deleveraging path absent aggressive action. Moderate coverage leaves the firm exposed to shocks and limits how quickly it can rebuild a conservative capital structure while still funding capex and service network expansion.

Earnings volatility and program/execution risks

Historical large swings and program issues (e.g., Trent 1000) coupled with supply‑chain constraints indicate persistent execution risk. Civil aerospace exposure means profits remain sensitive to fleet utilization, program tech challenges and contract renegotiations, increasing earnings variability over medium term.

Rolls-Royce Holdings Business Overview & Revenue Model

Company Description

Rolls-Royce Holdings plc operates as an industrial technology company in the United Kingdom and internationally. The company operates in four segments: Civil Aerospace, Power Systems, Defence, and New Markets. The Civil Aerospace segment develops, manufactures, and sells aero engines for large commercial aircraft, regional jet, and business aviation markets, as well as provides aftermarket services. The Power Systems segment engages in the development, manufacture, marketing, and sale of integrated solutions for onsite power and propulsion for the marine, defense, power generation, and industrial markets. The Defence segment offers aero engines for military transport and patrol aircraft applications; and naval engines and submarine nuclear power plants, as well as aftermarket services. The New Markets segment develops, manufactures, and sells small modular reactor and new electrical power solutions. It also provides maintenance, repair, and overhaul services. Rolls-Royce Holdings plc was founded in 1884 and is headquartered in London, the United Kingdom.

How the Company Makes Money

Rolls-Royce primarily earns revenue from (1) selling engines and power systems and (2) providing long-term aftermarket services that support those products throughout their operating lives. In Civil Aerospace, the company generates revenue from the sale of large aircraft engines to airframe manufacturers and airlines/lessors, and a substantial portion from long-term service agreements that cover maintenance and support; these contracts are commonly structured around engine flying hours and service events, creating recurring revenue tied to aircraft utilization and the size of the installed engine fleet. In Defence, revenue comes from supplying engines and propulsion systems to government and military customers and from through-life support and maintenance contracts, which can provide multi-year service income after delivery. In Power Systems, revenue comes from selling mtu engines and complete power solutions (including for marine and industrial uses and backup/prime power) and from parts, servicing, and lifecycle support for the installed base. Across segments, key earnings drivers include growth in the installed base, utilization levels (e.g., flight hours in Civil Aerospace), contract mix between original equipment and aftermarket services, and the company’s ability to deliver reliable parts and service operations. Significant partnerships or program structures may exist around aircraft/defence platforms and airframe/prime contractors, but specific named partnership details are null.

Rolls-Royce Holdings Financial Statement Overview

Summary

Strong turnaround in profitability and cash generation (income statement score 86; cash flow score 78) is offset by balance-sheet risk (balance sheet score 48) due to still-meaningful leverage and recently recovering equity base.

Income Statement

Profitability has improved sharply: revenue rose from 16.5B (2023) to 21.2B (2025) with accelerating growth in 2025, while margins expanded meaningfully (net margin ~27.5% in 2025 vs ~13.3% in 2024 and a loss in 2022). Operating profitability also strengthened, with a much higher operating margin in 2025 than prior years. Key weakness: results have been volatile over the cycle (large losses in 2020 and 2022), suggesting earnings can swing materially with industry conditions and program execution.

Balance Sheet

Leverage remains a notable constraint: debt is meaningful at ~5.35B in 2025 and the debt-to-equity profile is elevated, with equity having been negative as recently as 2024 before turning positive in 2025 (~2.73B). While the return on equity is exceptionally high in 2025 (reflecting the earnings rebound on a still-recovering equity base), the recent history of negative equity and leveraged capital structure increases financial risk and reduces balance-sheet flexibility versus stronger peers.

Cash Flow

Cash generation is strong and improving: operating cash flow increased from ~2.49B (2023) to ~4.39B (2025) and free cash flow rose to ~3.76B in 2025 with solid growth. Free cash flow closely tracks reported earnings (about 86% of net income in 2025), which supports earnings quality. Main weakness: despite improvement, cash flow relative to debt remains moderate (coverage around ~0.23), implying deleveraging capacity is good but not yet conservative.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	21.21B	18.91B	16.49B	13.52B	11.22B
Gross Profit	5.92B	4.22B	3.62B	2.69B	2.14B
EBITDA	6.14B	3.48B	3.74B	1.25B	996.00M
Net Income	5.84B	2.52B	2.41B	-1.27B	120.00M
Balance Sheet
Total Assets	38.12B	35.69B	31.51B	29.45B	28.67B
Cash, Cash Equivalents and Short-Term Investments	6.53B	5.36B	3.52B	2.40B	2.55B
Total Debt	4.27B	5.13B	5.76B	5.96B	7.78B
Total Liabilities	35.36B	36.57B	35.14B	35.47B	33.31B
Stockholders Equity	2.73B	-912.00M	-3.68B	-6.05B	-4.66B
Cash Flow
Free Cash Flow	3.76B	2.90B	1.77B	1.25B	-818.00M
Operating Cash Flow	4.38B	3.78B	2.48B	1.85B	-259.00M
Investing Cash Flow	-905.00M	-831.00M	-726.00M	826.00M	-428.00M
Financing Cash Flow	-2.83B	-1.05B	-549.00M	-2.87B	-88.00M

Rolls-Royce Holdings Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 1190.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:RR, the sentiment is Negative. The current price of 1190 is below the 20-day moving average (MA) of 1291.07, below the 50-day MA of 1271.26, and above the 200-day MA of 1122.50, indicating a neutral trend. The MACD of -12.20 indicates Positive momentum. The RSI at 39.77 is Neutral, neither overbought nor oversold. The STOCH value of 35.16 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GB:RR.

Rolls-Royce Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RR	76 Outperform	£100.11B	16.57	227.54%	0.91%	9.62%	146.74%
BA	71 Outperform	$67.28B	24.91	17.90%	1.99%	11.60%	8.03%
BAB	68 Neutral	£6.65B	9.88	43.22%	0.56%	7.36%	48.93%
SMIN	66 Neutral	£7.28B	15.92	13.46%	1.93%	-6.93%	18.57%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
MRO	62 Neutral	£6.08B	20.23	13.03%	1.10%	-0.38%	―