Rolls-Royce Holdings (RR) AI Stock Analysis

• Market Cap: $106.91B
• Dividend Yield: 0.91%
• Average Volume (3M): 17.97M
• Price to Earnings (P/E): 18.6
• Beta (1Y): 1.11
• Revenue Growth: 9.62%
• EPS Growth: 146.74%
• Country: UK
• Employees: 42,400
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): 0.16
• Shares Outstanding: 8,398,152,000
• 10 Day Avg. Volume: 27,664,651
• 30 Day Avg. Volume: 17,966,499
• PEG Ratio: 5.49
• Price to Book (P/B): -52.30
• Price to Sales (P/S): 2.52
• P/FCF Ratio: 16.47
• Enterprise Value/Market Cap: 0.75
• Enterprise Value/Revenue: 4.12
• Enterprise Value/Gross Profit: 16.75
• Enterprise Value/Ebitda: 19.02
• 1Y Price Target: $1,267.40
• Price Target Upside: -1.41% Downside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 10
• EPS Forecast (FY): 33.11
• Revenue Forecast (FY): $2.16T

• Rating: 71 Outperform
• Price Target: 1,420.00p ▲(10.46% Upside)

Rolls-Royce Holdings' overall stock score is driven by strong earnings call performance and fair valuation, despite financial stability concerns due to negative equity. Technical indicators suggest potential short-term weakness, but the company's strategic initiatives and improved margins provide a positive outlook.

Positive Factors

Revenue and profit growth

Consistent double-digit top-line growth and a 50% higher operating profit signal strengthening demand across civil aerospace and services. Durable revenue expansion supports long-term aftermarket and LTSA revenue visibility, cushioning cyclical OEM volatility and enabling strategic reinvestment.

Improved margins and upward guidance

Upgraded guidance and material margin improvement, including Civil Aerospace margin gains, reflect better cost control, renegotiated contracts, and structural productivity gains. Sustained higher operating margins increase free cash generation and provide a firmer base for long-term returns and investment.

Strong free cash flow generation

Substantial FCF growth and improved operating cash conversion indicate the business is converting improved profitability into cash. Durable cash generation supports debt reduction, shareholder returns and funding of R&D and service expansion, strengthening financial flexibility over the medium term.

Negative Factors

Negative equity and high leverage

Negative shareholders' equity shows liabilities exceed assets, constraining balance-sheet flexibility. This structural leverage elevates refinancing and covenant risks, limits capacity for large capital allocation, and makes the company more sensitive to interest and macro shocks over multiple quarters.

Trent 1000 engine reliability issues

Prolonged time-on-wing problems undermine product reputation and increase aftermarket maintenance costs and warranty exposure. Persistent technical issues can reduce aftermarket revenue visibility, strain airline relationships, and depress long-term service margins and new engine ordering decisions.

Supply chain constraints and cost inflation

Ongoing supply-chain bottlenecks and input cost inflation create sustained margin pressure and longer lead times for OE deliveries. These structural supply challenges can erode operating leverage, raise working capital needs, and slow the pace of profitable volume growth over several quarters.

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 generates revenue through several key streams. The largest portion comes from the Civil Aerospace sector, where the company earns money by selling jet engines and providing aftermarket services, including maintenance, repair, and overhaul (MRO) services. The Defense segment contributes through contracts with governments and defense agencies for military engines and support services. Additionally, the Power Systems division generates revenue from supplying engines and propulsion systems for marine and industrial applications. Strategic partnerships with aircraft manufacturers and defense contractors, along with long-term service agreements, play a critical role in stabilizing revenue, by ensuring a continuous demand for their products and services.

Rolls-Royce Holdings Financial Statement Overview

Summary

Rolls-Royce Holdings shows strong revenue and profit growth with improved cash flow metrics, indicating effective operational performance. However, significant balance sheet challenges with negative equity and high debt levels pose potential financial stability risks.

Income Statement

Rolls-Royce Holdings has demonstrated strong revenue growth with a 14.7% increase in 2024 compared to 2023. The gross profit margin improved to 22.3% in 2024 from 22.0% in 2023, indicating effective cost management. The company's net profit margin also increased to 13.3% in 2024. However, the EBITDA margin slightly decreased from 22.7% in 2023 to 18.4% in 2024, which suggests a need to control operating expenses further.

Balance Sheet

The balance sheet shows a significant challenge with negative stockholders' equity at -$912 million. This indicates that liabilities exceed assets, which could be a concern for financial stability. The debt-to-equity ratio cannot be calculated due to negative equity, but the overall high level of debt relative to assets remains a concern. The equity ratio is also negative, suggesting potential financial instability.

Cash Flow

Rolls-Royce's free cash flow grew by 63.3% in 2024, indicating strong cash generation capabilities. The operating cash flow to net income ratio improved to 1.50, showing efficient conversion of income to cash. However, the high free cash flow to net income ratio suggests reliance on non-operating sources of cash flow, which may not be sustainable long-term.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	19.54B	18.91B	16.49B	13.52B	11.22B	11.49B
Gross Profit	4.80B	4.22B	3.62B	2.69B	2.14B	1.11B
EBITDA	4.23B	3.48B	3.74B	1.25B	996.00M	222.00M
Net Income	5.79B	2.52B	2.41B	-1.27B	120.00M	-3.17B
Balance Sheet
Total Assets	37.94B	35.69B	31.51B	29.45B	28.67B	29.52B
Cash, Cash Equivalents and Short-Term Investments	6.13B	5.36B	3.52B	2.40B	2.55B	3.31B
Total Debt	5.04B	5.13B	5.76B	5.96B	7.78B	7.33B
Total Liabilities	35.51B	36.57B	35.14B	35.47B	33.31B	34.39B
Stockholders Equity	2.41B	-912.00M	-3.68B	-6.05B	-4.66B	-4.90B
Cash Flow
Free Cash Flow	3.18B	2.90B	1.77B	1.25B	-818.00M	-3.96B
Operating Cash Flow	4.13B	3.78B	2.48B	1.85B	-259.00M	-3.01B
Investing Cash Flow	-950.00M	-831.00M	-726.00M	826.00M	-428.00M	-1.01B
Financing Cash Flow	-1.36B	-1.05B	-549.00M	-2.87B	-88.00M	3.02B

Rolls-Royce Holdings Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 1285.50
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• 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 Positive. The current price of 1285.5 is above the 20-day moving average (MA) of 1212.20, above the 50-day MA of 1140.55, and above the 200-day MA of 1013.62, indicating a bullish trend. The MACD of 46.80 indicates Negative momentum. The RSI at 69.66 is Neutral, neither overbought nor oversold. The STOCH value of 73.04 is Neutral, 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

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AHT	77 Outperform	£22.14B	21.12	18.88%	1.71%	-3.66%	-9.01%
RR	71 Outperform	$106.91B	18.58	3725.44%	0.91%	9.62%	146.74%
BAB	68 Neutral	£7.32B	25.75	46.10%	0.56%	7.36%	48.93%
SMIN	66 Neutral	£8.11B	29.89	12.85%	1.93%	-6.93%	18.57%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
BA	61 Neutral	$59.56B	31.02	17.59%	1.99%	11.60%	8.03%
MRO	50 Neutral	£8.00B	25.88	10.69%	1.10%	-0.38%	―