Rolls Royce Stock Price Jumps After Strong Earnings Report
The price of Rolls-Royce’s stock has increased by 3% in response to the company’s strong earnings report last week. The corporation brought in more money than expected, and its profits were higher than projected.
Unfortunately, not all of its product lines performed as well as others, but many investors are still optimistic about the company’s future because this isn’t the first time it has succeeded in spite of economic turmoil.
In fact, several analysts are predicting that Rolls-Royce will outperform the overall market. So far, it looks like they might be right.
Rolls-Royce’s stock price jumped 5% Tuesday, July 17, after the company reported strong earnings in its second-quarter results.
Rolls-Royce PLC shares jumped Tuesday following a strong quarterly earnings report from Britain’s largest defense contractor. The stock rose 2.1 percent to 663 pence in London trading, its highest level since 2008.
Rolls-Royce, which supplies engines and other aircraft parts to airlines and governments around the world, said it earned $787 million in its fiscal first quarter ended March 31, up 15 percent from a year earlier. Revenue increased 12 percent to $6.4 billion.
In addition, Rolls-Royce raised its full-year forecast for free cash flow by £100 million ($157 million) because of stronger demand for services and spare parts.
Free cash flow is an important measure of financial health because it measures how much money a company has available after paying expenses such as taxes and interest payments on debt.
We are very pleased with our performance in Q1, Chief Executive John Rishton said in a statement. Rolls-Royce continues to deliver on its strategy.
Rolls-Royce shares have more than doubled over the past year, helped by improving demand for airplane engines and rising oil prices that have boosted sales of jet fuel.
But investors also hope that Rolls will benefit from higher military spending amid geopolitical tensions over Ukraine and Russia.
Rolls-Royce makes engines for fighter jets and helicopters used by militaries around the world. Shares of Rolls-Royce rival General Electric Co., which also makes jet engines, were flat at $27.40 in afternoon trading Tuesday.
GE announced plans last week to spin off its highly profitable aviation business into a separate publicly-traded company called Genworth Financial Inc., allowing GE to focus on its core industrial businesses like power generation and oil drilling equipment.
Rolls-Royce was formed in 1904 when C.S. Rolls and Henry Royce started building cars together under their RR brand name.
It began making planes during the First World War and has supplied engines for nearly every commercial plane made since then, including Boeing 747 jumbo jets and Airbus A380 superjumbos.
Today Rolls-Royce employs about 50,000 people worldwide, about half of them based in Britain where it is headquartered near Derby in central England.
Rolls-Royce Holdings Plc (RR.) shares rose by more than 3% in early morning trading on Friday after the company announced a big jump in net income from last year.
In addition, Rolls-Royce reported that it expects to make even more money in future quarters based on increased demand for its planes and engines.
The company also said that it had sold over 8,000 engines last year and plans to build 9,000 more in 2015.
We are very pleased with our strong performance in 2014, said CEO John Rishton. This was an exceptional year. He added that he was confident about further growth in 2015 and beyond.
Rolls Royce stock price has risen sharply since late 2013 when it began climbing steadily as investors became increasingly optimistic about demand for air travel around the world.
It is up almost 50% since then, but many analysts still think there is room for more growth as global air traffic continues to increase at a rapid pace.
Last month, Goldman Sachs upgraded its rating on Rolls-Royce from neutral to buy due to what they called an upbeat view of aerospace markets.
We believe that Rolls Royce stock price should be able to outperform over time, said analyst Noah Poponak in a research note.
We see strong long-term fundamentals in civil aerospace and defense driven by the Asia Pacific and the Middle East/North Africa regions driving higher engine sales volume over time.
The company reported a net income of $1.6 billion last year compared with $1 billion in 2013, while revenue rose slightly to $18 billion from $17 billion last year.
Shares of Rolls-Royce were trading up 3% at 9:30 AM EST on Friday morning following the announcement before slipping back down slightly after news broke that China had devalued its currency overnight.
Aerospace and defense companies have been hot investments over the past few years as countries around the world continue to spend more money on military equipment and new aircraft.
According to a recent report by Deloitte, aerospace, and defense companies are expected to post some of the highest growth rates among all industries between now and 2020 thanks largely to increased spending by emerging markets like India and Brazil.
That same report also found that demand for commercial aircraft is expected to increase by about 4% per year through 2020 as airlines replace older planes with newer models.
It is estimated that airlines will need about 29,000 new planes worth a total of $4 trillion over that time period.
The figures released by Rolls-Royce show a 13.6% rise in annual pre-tax profits, rising from £564 million to £659 million and beating analysts’ estimates of £616 million.
Rolls has announced that it is planning to invest heavily in research and development; over £2 billion will be spent on R&D over the next five years.
This was cited as one of the reasons for its strong performance. The company also announced plans to reduce its debt levels and increase its cash reserves by selling off some non-core assets.
This should help to increase investors’ confidence in Rolls-Royce as a company, which could help push up its stock price even further.
Overall, Rolls-Royce had a very positive financial performance in 2017 and its share price rose more than 11%.
Shareholders have been rewarded with an increased dividend payment as well. Investors have reacted positively to this news, pushing up Rolls-Royce’s share price by more than 4%. As such, I think that 2022 looks set to be another good year for Rolls-Royce shareholders.
In fact, Rolls-Royce has delivered double-digit growth every year since 2003. For example, revenue grew by 15% in 2016 and 19% in 2015.
Analysts expect similar growth rates again in 2018 and 2019. Although there are still concerns about Brexit and geopolitical tensions leading to problems with demand (particularly from China), they do not seem to have impacted Rolls so far.
Moreover, recent increases in spending on defense mean that demand for aircraft engines may continue to grow at a healthy rate despite worries about global economic conditions elsewhere dampening overall growth.