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Rolls-Royce Holdings (GB:RR)
LSE:RR
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Rolls-Royce Holdings
(LSE:RR)
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Rating:73Outperform
Price Target:
1,218.00p
▲(10.43% Upside)
Rolls-Royce Holdings' overall stock score reflects strong financial performance and positive earnings call sentiment, despite balance sheet challenges. Technical indicators support a bullish outlook, while valuation remains reasonable. The company's strategic initiatives and improved profitability are key strengths, though financial stability risks need addressing.
Positive Factors
Negative Factors
Rolls-Royce Holdings (RR) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
$95.94B
Dividend Yield0.95%
Average Volume (3M)27.00M
Price to Earnings (P/E)16.6
Beta (1Y)1.15
Revenue Growth9.62%
EPS Growth146.74%
CountryUK
Employees42,400
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.16
Shares Outstanding8,416,127,000
10 Day Avg. Volume26,808,280
30 Day Avg. Volume27,004,435
Financial Highlights & Ratios
PEG Ratio5.49
Price to Book (P/B)-52.30
Price to Sales (P/S)2.52
P/FCF Ratio16.47
Enterprise Value/Market Cap0.84
Enterprise Value/Revenue4.25
Enterprise Value/Gross Profit19.05
Enterprise Value/Ebitda23.09
Forecast
1Y Price Target
$1,178.72Price Target Upside6.86% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
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 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 | 11.49B |
| Gross Profit | 4.22B | 3.62B | 2.69B | 2.14B | 1.11B |
| EBITDA | 3.48B | 3.74B | 1.25B | 996.00M | 222.00M |
| Net Income | 2.52B | 2.41B | -1.27B | 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 | 3.31B |
| 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 | 1.25B | -818.00M | -3.96B |
| 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
Negative
1103.00
Price Trends
1113.25
Negative
1032.22
Positive
865.66
Positive
Market Momentum
1.59
Positive
41.51
Neutral
35.19
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:RR, the sentiment is Negative. The current price of 1103 is below the 20-day moving average (MA) of 1153.40, below the 50-day MA of 1113.25, and above the 200-day MA of 865.66, indicating a neutral trend. The MACD of 1.59 indicates Positive momentum. The RSI at 41.51 is Neutral, neither overbought nor oversold. The STOCH value of 35.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 | $95.94B | 16.64 | 3725.44% | 0.95% | 9.62% | 146.74% | |
71 Outperform | £1.49B | 38.33 | 11.62% | 1.42% | 8.00% | 674.47% | |
70 Outperform | $55.75B | 29.00 | 17.59% | 1.80% | 11.60% | 8.03% | |
66 Neutral | £782.84M | 22.51 | 8.19% | 1.11% | -13.81% | 13.86% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
61 Neutral | £5.91B | 24.05 | 49.75% | 0.55% | 10.08% | 49.21% | |
54 Neutral | £2.53B | 17.97 | -23.92% | 1.87% | 1.02% | -240.44% |
* Industrials Sector Average
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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.