The share price of the UK-based Rolls Royce Holdings PLC (GB:RR) has taken centre stage on the FTSE 100 index so far in 2023. Over the past year, the manufacturing giant’s valuation has nearly tripled, driven by double-digit growth in sales and profits in the first half of 2023. Specifically, the revival of the aviation sector and an effective turnaround strategy played pivotal roles in achieving improved figures.
The Rolls-Royce share price has gained around 200% in trading over the last 12 months. In July, shares soared by more than 20% in a day after the company increased its annual profit guidance for FY23. The company revised its annual earnings projection to the range of £1.2 billion to £1.4 billion, exceeding the earlier guidance of £800 million to £1 billion.
Rolls-Royce is a manufacturing company that designs engines and power systems for the aerospace and defence industries. Headquartered in London, the company has a global presence, with operations extending across the U.S., Asia, Europe, the Middle East, and Africa.
The Bull Run
The surge in international air travel following the COVID-19 pandemic, coupled with the geopolitical tensions and the subsequent rise in defence spending, has provided a significant boost to the business.
Currently, the firm’s primary revenue source is the design and maintenance of aircraft engines designed for long-haul flights. The company experienced a solid resurgence in this segment, primarily fuelled by increased flight hours. Notably, large-engine flight hours have rebounded to more than 80% of their pre-pandemic levels, clearly indicating the recovery in business.
This recovery was clearly visible in the company’s first-half earnings reports, published in August 2023. The company achieved a remarkable turnaround, transitioning from a loss of £111 million in H1 2022 to a pre-tax profit of £524 million in H1 2023.
Additionally, the leadership of the chief executive, Tufan Erginbilgic, has proven to be highly beneficial for the company. Analysts and investors are confident that the company is establishing the foundation for enduring success under his tenure.
Moving ahead, investors and analysts are eagerly awaiting the investor day planned for November 2023, which will disclose the company’s medium-term financial targets.
Six days ago, UBS analyst Ian Douglas confirmed his Buy rating, predicting a 53% growth on the current trading levels. He also increased his price target from 200p to 350p, as he believes the enhanced cash flow is not adequately reflected in the stock’s current valuation. Douglas is a four-star rated analyst on TipRanks.
Meanwhile, 11 days ago, analyst David Perry from J.P. Morgan reiterated his Hold rating on the stock, forecasting a modest increase of 3.4%.
Is Rolls Royce a Good Stock to Buy Right Now?
According to TipRanks, RR stock has received a Moderate Buy rating based on six Buy and four Hold recommendations. The Rolls-Royce share price forecast is 242.2p, which is 7.2% higher than the current trading level.