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Rolls-Royce Holdings (GB:RR)
LSE:RR
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Rolls-Royce Holdings
(LSE:RR)
Rating:75Outperform
Price Target:
1,206.00p
▲(11.98% Upside)
Positive Factors
Financial Performance
Rolls-Royce achieved a substantial improvement in EBIT, outperforming forecasts by around 40%.
Market Position
Rolls-Royce remains on track to achieve one of the greatest turnarounds in UK corporate history.
Shareholder Confidence
A £1bn share buyback programme has been launched, demonstrating confidence in the outlook and a strong commitment to shareholder returns.
Negative Factors
Market Risks
The bigger risk from tariffs is to engine flying hours from potentially weakening air traffic demand, which could have an almost immediate impact on cash generation.
Rolls-Royce Holdings (RR) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
$91.85B
Dividend Yield0.97%
Average Volume (3M)23.37M
Price to Earnings (P/E)15.9
Beta (1Y)1.31
Revenue Growth9.62%
EPS Growth146.74%
CountryUK
Employees42,400
SectorIndustrials
Sector Strength84
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.16
Shares Outstanding8,441,146,000
10 Day Avg. Volume30,356,758
30 Day Avg. Volume23,372,506
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)0.00
Price to Sales (P/S)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap0.88
Enterprise Value/Revenue4.25
Enterprise Value/Gross Profit19.00
Enterprise Value/Ebitda28.24
Forecast
1Y Price Target
$1,042.94Price Target Upside-3.16% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering6
Rolls-Royce Holdings Business Overview & Revenue Model
Company DescriptionRolls-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 MoneyRolls-Royce Holdings generates revenue through the sale of aircraft engines and power systems, as well as through long-term service agreements. The Civil Aerospace sector is the primary revenue driver, with significant income from the sale of commercial jet engines and associated services. The company offers maintenance, repair, and overhaul services through its TotalCare and CorporateCare programs, which provide stable, recurring revenue streams. In the Defense sector, Rolls-Royce earns money by supplying engines and services for military aircraft, naval vessels, and land-based defense vehicles. The Power Systems segment contributes to revenue by providing engines and systems for marine, energy, and industrial applications. Strategic partnerships with major airlines, defense contractors, and governments worldwide also enhance the company's earnings potential.
Rolls-Royce Holdings Earnings Call Summary
Earnings Call Date:Jul 31, 2025
(Q2-2025)
| % Change Since: 9.46%|
Next Earnings Date:Feb 26, 2026
Earnings Call Sentiment Positive
The earnings call reflected strong financial and operational performance across all divisions, with significant growth in operating profit and cash flow driven by strategic initiatives. However, challenges in the supply chain and macroeconomic environment persist.Q2-2025 Updates
Positive Updates
Strong Financial Performance
Group operating profit grew by 50% to GBP 1.7 billion, with operating margin increasing by 4.9 percentage points to 19.1%. Free cash flow was GBP 1.6 billion, 37% higher than last year.
Civil Aerospace Success
Operating profit in Civil Aerospace grew by 63% to GBP 1.2 billion, with an operating margin increase of 7.1 percentage points to 24.9%. Aftermarket revenue for large engines grew by 28%.
Power Systems Growth
Power Systems operating profit increased by 89% to GBP 313 million, with a 5.6 percentage point rise in operating margin to 15.3%. Order intake grew by 32% year-on-year.
Defence Segment Strength
Order intake for Defence was GBP 4 billion with a book-to-bill ratio of 1.8x. The order backlog reached GBP 18.8 billion, a record level.
Strategic Initiatives and Investments
Continued strategic initiatives resulted in significant contract renegotiations benefiting cash flows by GBP 1.4 billion over contract life. Investments in time on wing and UltraFan are driving future growth.
Negative Updates
Supply Chain Challenges
Despite improvements, the supply chain remains challenging with ongoing product cost inflation impacting the business.
Higher Number of Shop Visits
An increased number of shop visits, particularly for the Trent 1000, impacted cash flow growth in the Civil Aerospace segment.
Uncertain Macro Environment
The business is operating in an uncertain macro environment with tariffs and supply chain issues affecting overall performance.
Company Guidance
In the recent call, Rolls-Royce shared an optimistic outlook for 2025, backed by significant improvements in key financial metrics. The company reported a 50% increase in operating profit, reaching GBP 1.7 billion, and a 37% rise in free cash flow, totaling GBP 1.6 billion. They announced an interim dividend of 4.5p per share and highlighted a GBP 1 billion share buyback plan, with GBP 500 million already completed. Additionally, Rolls-Royce achieved a group operating margin of 19.1%, a 4.9 percentage point increase from last year, and Civil Aerospace's operating margin rose to 24.9%. The call emphasized the positive impact of strategic initiatives, such as a 15% improvement in parts availability and a 28% growth in aftermarket revenue for large engines. These achievements underpin their confidence in raising the full-year guidance, now expecting an operating profit of GBP 3.1 to GBP 3.2 billion and free cash flow of GBP 3 to GBP 3.1 billion.Rolls-Royce Holdings Financial Statement Overview
Summary
Rolls-Royce Holdings shows strong revenue and profit growth with a significant increase in cash flow metrics, indicating effective operational performance. However, the company faces balance sheet challenges with negative equity and high debt levels, posing 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.85
Very Positive
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.45
Neutral
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.78
Positive
| Breakdown | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 18.91B | 16.49B | 13.52B | 11.22B | 11.82B |
| Gross Profit | 4.22B | 3.62B | 2.76B | 2.14B | -210.00M |
| EBITDA | 3.48B | 3.74B | 1.29B | 996.00M | -166.00M |
| Net Income | 2.52B | 2.41B | -1.19B | 120.00M | -3.17B |
Balance Sheet | |||||
| Total Assets | 35.69B | 31.51B | 29.45B | 28.67B | 29.52B |
| Cash, Cash Equivalents and Short-Term Investments | 5.36B | 3.52B | 2.40B | 2.55B | 3.42B |
| Total Debt | 5.13B | 5.76B | 5.96B | 7.78B | 7.33B |
| Total Liabilities | 36.57B | 35.14B | 35.47B | 33.31B | 34.39B |
| Stockholders Equity | -912.00M | -3.68B | -6.05B | -4.66B | -4.90B |
Cash Flow | |||||
| Free Cash Flow | 2.90B | 1.77B | 1.49B | -587.00M | -3.59B |
| Operating Cash Flow | 3.78B | 2.48B | 1.85B | -259.00M | -3.01B |
| Investing Cash Flow | -831.00M | -726.00M | 826.00M | -428.00M | -1.01B |
| Financing Cash Flow | -1.05B | -549.00M | -2.87B | -88.00M | 3.02B |
Rolls-Royce Holdings Technical Analysis
Positive
1077.00
Price Trends
951.19
Positive
857.62
Positive
726.36
Positive
Market Momentum
36.60
Negative
68.93
Neutral
76.21
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 1077 is above the 20-day moving average (MA) of 1013.51, above the 50-day MA of 951.19, and above the 200-day MA of 726.36, indicating a bullish trend. The MACD of 36.60 indicates Negative momentum. The RSI at 68.93 is Neutral, neither overbought nor oversold. The STOCH value of 76.21 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
Overall Rating
UnderperformOutperform
Sector (71)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $91.85B | 15.88 | 3725.44% | 0.97% | 9.62% | 146.74% | |
71 Outperform | ¥258.28B | 14.57 | 8.48% | 2.82% | 6.30% | 11.95% | |
| ― | $71.90B | 28.89 | 17.59% | 1.80% | ― | ― | |
77 Outperform | £747.15M | 31.04 | 8.19% | 0.98% | 1.41% | -16.76% | |
75 Outperform | £1.50B | 38.47 | 11.62% | 1.46% | 8.00% | 674.47% | |
63 Neutral | £2.71B | 17.97 | -23.92% | 1.78% | 1.02% | -240.44% | |
61 Neutral | £5.05B | 20.44 | 49.75% | 0.56% | 10.08% | 49.21% |
* Industrials Sector Average
Performance Comparison
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124.85%
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GB:SNR
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GB:QQ
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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.