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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
▲(14.15% Upside)
Positive Factors
Financial Performance
Rolls-Royce achieved a substantial improvement in EBIT, outperforming forecasts by around 40%.
Market Position
Rolls-Royce could be an obvious beneficiary if Airbus considers derisking its engine reliance on the US, being a European-based engine OEM already supplying to Airbus' widebody programmes.
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.
Operational Risks
Rolls-Royce expects to offset the impact of tariffs through mitigating actions.
Rolls-Royce Holdings (RR) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
$89.19B
Dividend Yield0.99%
Average Volume (3M)30.81M
Price to Earnings (P/E)15.2
Beta (1Y)1.26
Revenue Growth9.62%
EPS Growth146.74%
CountryUK
Employees42,400
SectorIndustrials
Sector Strength79
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.16
Shares Outstanding8,434,216,000
10 Day Avg. Volume38,661,568
30 Day Avg. Volume30,811,264
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap0.90
Enterprise Value/Revenue4.25
Enterprise Value/Gross Profit19.00
Enterprise Value/Ebitda28.24
Forecast
1Y Price Target
$1,178.18Price Target Upside11.52% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering8
Rolls-Royce Holdings Business Overview & Revenue Model
Company DescriptionRolls-Royce Holdings plc is a British multinational engineering company that specializes in power and propulsion systems. Established in 1904, the company operates primarily in the aerospace, defense, and energy sectors. Rolls-Royce is renowned for its aircraft engines, providing advanced propulsion systems for both commercial and military aviation. Additionally, the company is involved in the design and manufacturing of marine propulsion systems and power generation equipment, catering to various industries, including civil and military aerospace, marine, and energy.
How the Company Makes MoneyRolls-Royce generates revenue through several key streams, primarily from the sale of its high-performance aircraft engines, which are utilized in commercial and military aircraft. The company operates a significant aftermarket services business, providing maintenance, repair, and overhaul (MRO) services for its engines, which creates a recurring revenue model as customers pay for ongoing support and service agreements. In addition to aerospace, Rolls-Royce earns income from its power systems division, which delivers solutions for marine and industrial applications, and from its nuclear and renewable energy sectors. The company has established partnerships with various airlines, defense contractors, and government agencies, which further solidify its revenue base. Economic factors, defense spending trends, and advancements in technology also play crucial roles in influencing the company's earnings.
Rolls-Royce Holdings Earnings Call Summary
Earnings Call Date:Jul 31, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Feb 26, 2026
Earnings Call Sentiment Positive
The earnings call reflected significant improvements in financial performance, operational margins, and strategic initiatives. Despite facing supply chain constraints and specific challenges with Trent 1000 engines, the company raised its guidance for 2025 and is on track with strategic targets. The sentiment is optimistic due to strong execution of strategic initiatives, profitability improvements, and increased shareholder returns.Q2-2025 Updates
Positive Updates
Strong Financial Performance
Operating profit of GBP 1.7 billion was 50% higher than last year. Group revenues grew by 13% to GBP 9.1 billion with good end market growth. Free cash flow was GBP 1.6 billion, 37% higher than last year.
Improved Margins
Group operating margin of 19.1%, 4.9 percentage points higher than last year. Civil Aerospace's operating margin rose by 7.1 percentage points to 24.9%.
Data Center and Power Systems Growth
Power Systems captured data center growth with improved profitability. Data center revenue growth was 45%, and order intake growth for power generation was 68%.
Defence Segment Achievements
Order intake of GBP 4 billion with a book-to-bill ratio of 1.8x. Record order backlog of GBP 18.8 billion, equivalent to around 4 years of revenue.
Dividend and Share Buyback
An interim dividend of 4.5p was announced, and GBP 500 million of a GBP 1 billion share buyback has been completed.
Strategic Initiatives and Target Exceeding
Renegotiated all significant onerous airline contracts, achieving major progress in time on wing improvements.
Negative Updates
Supply Chain Constraints
Performance impacted by industry-wide supply chain constraints. Continued product cost inflation as a result of supply chain challenges.
Challenges with Trent 1000 Engines
Customers have been disappointed with Trent 1000 time on wing issues, although improvements are underway.
Lower Second Half Expectations
Expected lower operating profit and cash flow in the second half due to lower contribution from contractual margin improvements and increased number of OE deliveries.
Company Guidance
In the recent call, the company provided updated guidance for 2025, highlighting strong financial performance and strategic progress. The underlying operating profit is now expected to reach between GBP 3.1 billion to GBP 3.2 billion, reflecting a significant improvement from the first half's GBP 1.7 billion. Free cash flow is projected to be GBP 3 billion to GBP 3.1 billion, driven by higher operating profit and continued LTSA balance growth. The operating margin for the first half was 19.1%, up 4.9 percentage points from last year, with Civil Aerospace's margin rising by 7.1 percentage points to 24.9%. The group aims to return GBP 1.9 billion to shareholders in 2025, demonstrating a commitment to rewarding shareholders amidst ongoing strategic investments.Rolls-Royce Holdings Financial Statement Overview
Summary
Rolls-Royce Holdings shows strong revenue and profit growth with improved cash flow metrics. 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.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
1056.50
Price Trends
996.53
Positive
891.77
Positive
757.51
Positive
Market Momentum
16.54
Positive
54.86
Neutral
24.56
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 1056.5 is below the 20-day moving average (MA) of 1061.90, above the 50-day MA of 996.53, and above the 200-day MA of 757.51, indicating a neutral trend. The MACD of 16.54 indicates Positive momentum. The RSI at 54.86 is Neutral, neither overbought nor oversold. The STOCH value of 24.56 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 (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $89.19B | 15.22 | 3725.44% | 0.99% | 9.62% | 146.74% | |
64 Neutral | $10.95B | 16.10 | 8.81% | 1.99% | 2.59% | -16.41% | |
| ― | $69.79B | 27.90 | 17.59% | 2.98% | ― | ― | |
77 Outperform | £832.24M | 23.93 | 8.19% | 0.88% | -13.81% | 13.86% | |
71 Outperform | £1.47B | 37.50 | 11.62% | 0.96% | 8.00% | 674.47% | |
61 Neutral | £5.13B | 20.38 | 49.75% | 0.64% | 10.08% | 49.21% | |
56 Neutral | £2.59B | 17.97 | -23.92% | 1.84% | 1.02% | -240.44% |
* Industrials Sector Average
Performance Comparison
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Rolls-Royce Holdings
1,056.50
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113.86%
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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.