Rolls-Royce Holdings (RR) AI Stock Analysis

• Market Cap: £112.37B
• Dividend Yield: 0.91%
• Average Volume (3M): 28.07M
• Price to Earnings (P/E): 19.2
• Beta (1Y): 1.18
• 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: 8,426,904,000
• 10 Day Avg. Volume: 33,470,968
• 30 Day Avg. Volume: 28,065,372
• 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: £1,363.32
• Price Target Upside: 2.24% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 9
• EPS Forecast (FY): 0.34
• Revenue Forecast (FY): £21.83B

• Rating: 76 Outperform
• Price Target: 1,507.00p ▲(13.01% 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

Improved Operating Margins

Sustained margin expansion across the group, especially Civil Aerospace, reflects stronger pricing, cost control and operational improvements. Higher structural operating margins increase cash generation capacity, resilience to cyclical demand swings and long-term profitability prospects.

Strengthening Cash Generation

Material FCF growth and improved cash conversion indicate the business is turning earnings into cash more effectively. Coupled with guidance for multi‑billion FCF and LTSA balance growth, this supports durable self‑funding for capex, servicing debt and shareholder returns over the medium term.

Large Multi-Year Backlog

A substantial backlog and strong defence order intake provide multi-year revenue visibility and production loading. This backlog underpins aftermarket and service revenue streams, smoothing cyclicality and supporting long-term operational planning and margin recovery.

Negative Factors

Negative Shareholders' Equity

Liabilities exceeding assets is a structural balance sheet weakness that restricts financial flexibility, raises refinancing and covenant risks, and can limit investment or M&A capacity. This undercuts long‑term resilience despite improving operations and cash flow.

Questionable Cash Quality

A large FCF-to-net‑income divergence indicates some cash generation may come from non‑core or timing items. If operating performance softens, FCF could fall faster than reported earnings, stressing liquidity and making heavy debt burdens harder to manage over time.

Product Reliability & Supply Chain Risks

Ongoing Trent 1000 durability problems and wider supply‑chain cost inflation create persistent warranty, remediation and contractual risks. They can erode aftermarket trust, increase lifecycle support costs, and pressure margins and backlog fulfilment over multiple years if not fully resolved.

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

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	5.35B	5.13B	5.76B	5.96B	7.78B
Total Liabilities	35.15B	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: Positive
• Last Price: 1333.50
• 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 1333.5 is above the 20-day moving average (MA) of 1280.10, above the 50-day MA of 1244.83, and above the 200-day MA of 1092.91, indicating a bullish trend. The MACD of 29.04 indicates Negative momentum. The RSI at 61.64 is Neutral, neither overbought nor oversold. The STOCH value of 54.19 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	£22.03B	21.12	18.88%	1.71%	-3.66%	-9.01%
RR	76 Outperform	£112.37B	19.21	604.85%	0.91%	9.62%	146.74%
BA	71 Outperform	£61.59B	30.70	17.90%	1.99%	11.60%	8.03%
BAB	68 Neutral	£6.73B	23.72	46.10%	0.56%	7.36%	48.93%
SMIN	66 Neutral	£8.56B	32.04	12.85%	1.93%	-6.93%	18.57%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
MRO	62 Neutral	£7.09B	19.45	10.69%	1.10%	-0.38%	―