Rolls-Royce Holdings (GB:RR)
OTHER OTC:RR
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Rolls-Royce Holdings
(OTC:RR)
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Rating:72Outperform
Price Target:
1,485.00 p
▲(13.31% Upside)
Action:Upgraded
Date:05/01/26
The score is driven primarily by improving financial performance (profit and free-cash-flow strength despite balance-sheet leverage risk) and a very constructive earnings call (upgraded guidance and sizeable shareholder returns). Technicals are currently a headwind with weak-to-neutral momentum, while valuation appears reasonable but not compelling given the low dividend yield.
Positive Factors
Strong free cash flow generation
Rolls‑Royce converted rising revenue into substantial free cash flow (~£3.8bn in 2025). Durable FCF improves financial flexibility, funds ongoing R&D and platform investments (UltraFan, SMR, Series 4000), supports buybacks/dividends and materially strengthens capacity to deleverage without dilutive financing.
Negative Factors
Elevated leverage and prior negative equity
Material debt and a recent period of negative equity limit balance‑sheet flexibility. High leverage increases refinancing and downside risk, constrains the pace of investment or acquisitive moves, and makes the business more sensitive to cyclical shocks despite improving earnings and cash generation.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong free cash flow generation
Rolls‑Royce converted rising revenue into substantial free cash flow (~£3.8bn in 2025). Durable FCF improves financial flexibility, funds ongoing R&D and platform investments (UltraFan, SMR, Series 4000), supports buybacks/dividends and materially strengthens capacity to deleverage without dilutive financing.
Read all positive factors
Rolls-Royce Holdings (RR) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£109.97B
Dividend Yield0.91%
Average Volume (3M)33.96M
Price to Earnings (P/E)19.2
Beta (1Y)1.42
Revenue Growth12.15%
EPS Growth132.10%
CountryUK
Employees42,400
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.69
Shares Outstanding8,365,140,000
10 Day Avg. Volume26,096,240
30 Day Avg. Volume33,964,485
Financial Highlights & Ratios
PEG Ratio0.13
Price to Book (P/B)35.50
Price to Sales (P/S)4.56
P/FCF Ratio25.71
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£1,405.00Price Target Upside7.20% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering10
EPS Forecast (FY)0.37
Revenue Forecast (FY)£22.64B
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,...
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 th...
Rolls-Royce Holdings Earnings Call Summary
Earnings Call Date:Feb 26, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Jul 30, 2026
Earnings Call Sentiment Positive
The call presented a strong and broad operational and financial recovery with upgraded guidance, materially higher margins, significant free cash flow generation and a major shareholder return program. Civil Aerospace and Power Systems delivered standout profit and cash improvements, operational initiatives (time on wing, AI) are already driving benefits, and long-term growth opportunities (SMR, UltraFan, data center engines) were highlighted. Key near-term challenges are persistent supply-chain and product-cost inflation, some non‑recurring contractual gains in 2025, and timing of LTSA cash realization (largely post‑2028). On balance, the positive trends — upgraded targets, robust cash generation, balance sheet repair and a sizeable buyback/dividend program — outweigh the stated headwinds.Positive Updates
Strong Group Financial Performance
Group revenue grew 14% to GBP 20.0bn; underlying operating profit GBP 3.5bn (5x vs 2022); operating margin 17.3% (more than tripled vs 2022); free cash flow GBP 3.3bn (up >GBP 800m YoY); return on capital ~18.9% (≈4x vs 2022).
Negative Updates
Ongoing Supply Chain Constraints and Product Cost Inflation
Industry-wide supply chain issues persist into 2026; product cost inflation resulted in an additional charge of GBP 161m in 2025; management expects a remaining supply-chain cash impact of ~GBP 150–200m in 2026 before it is eliminated by the midterm.
Read all updates
Q4-2025 Updates
Positive
Negative
Strong Group Financial Performance
Group revenue grew 14% to GBP 20.0bn; underlying operating profit GBP 3.5bn (5x vs 2022); operating margin 17.3% (more than tripled vs 2022); free cash flow GBP 3.3bn (up >GBP 800m YoY); return on capital ~18.9% (≈4x vs 2022).
Read all positive updates
Company Guidance
Rolls‑Royce guided 2026 underlying operating profit of £4.0–4.2bn and free cash flow of £3.6–3.8bn, and upgraded its 2028 mid‑term targets to operating profit £4.9–5.2bn, operating margin 18–20%, free cash flow £5.0–5.3bn and return on capital 23–26%; division mid‑term margins were set at Civil Aerospace 21–23%, Power Systems 18–20% and Defence 14–16%. For 2026 the company expects net LTSA balance growth broadly similar to 2025, large‑engine flying hours of c.115–120% of 2019 (rising to c.130–140% by mid‑term), shop visits of 1,480–1,550 in 2026 peaking then falling to 1,300–1,400 by 2028, and mid‑term net LTSA balance growth of c.£0.8–1.2bn; it also flagged a 2026 supply‑chain cash drag of c.£150–200m that will be gone by the mid‑term and assumes a blended FX of $1.33/£ (vs $1.44 in 2025). The plan anticipates mid‑term investment averaging above depreciation & amortisation, working‑capital releases with 2028 broadly neutral, overhedge costs cleared by end‑2026, higher cash tax as profits grow, a £7–9bn 2026–28 buyback program (c.£2.5bn in 2026 including £200m already executed) alongside growing dividends (2025 final 5p, full year 9.5p, 32% payout), and sees contract margins ~2pp and LTSA income‑statement margins ~8pp higher than prior guidance, all supporting sustained margin and cash‑flow expansion.Rolls-Royce Holdings Financial Statement Overview
Summary
Income Statement
86
Very Positive
Balance Sheet
48
Neutral
Cash Flow
78
Positive
| 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
Positive
1310.60
Price Trends
1206.06
Positive
1236.70
Positive
1173.99
Positive
Market Momentum
24.55
Negative
64.44
Neutral
91.66
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:RR, the sentiment is Positive. The current price of 1310.6 is above the 20-day moving average (MA) of 1225.81, above the 50-day MA of 1206.06, and above the 200-day MA of 1173.99, indicating a bullish trend. The MACD of 24.55 indicates Negative momentum. The RSI at 64.44 is Neutral, neither overbought nor oversold. The STOCH value of 91.66 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:RR.
Rolls-Royce Holdings Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | £7.41B | 31.44 | 13.71% | 1.93% | -31.27% | -13.26% | |
72 Outperform | £109.97B | 19.24 | 227.54% | 0.91% | 12.15% | 132.10% | |
69 Neutral | £59.25B | 29.44 | 18.23% | 1.99% | 7.69% | 7.29% | |
68 Neutral | £5.42B | 19.21 | 43.22% | 0.56% | 7.36% | 48.93% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
62 Neutral | £5.93B | 16.00 | 13.03% | 1.10% | 3.49% | ― |
* Industrials Sector Average
GB:RR
Rolls-Royce Holdings
1,337.40
478.57
55.72%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.