UK Stocks: Recent Ratings Suggest Further Momentum in Rolls-Royce (RR) Shares
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UK Stocks: Recent Ratings Suggest Further Momentum in Rolls-Royce (RR) Shares

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Engine manufacturer Rolls-Royce stock has generated stellar returns of 180% in the last 12 months. Many analysts believe there is further potential in the stock. Let’s find out.

Among the famous UK stocks, FTSE 100-listed Rolls-Royce Holdings PLC (GB:RR) has recently received Buy ratings from analysts, suggesting further upward momentum for its shares. RR stock experienced a remarkable journey last year. Several analysts remain bullish on Rolls-Royce stock and predict more upside. Year-to-date, the Rolls-Royce share price has rallied by over 40%.

Rolls-Royce is an iconic British company that designs and manufactures engines and power systems for the aerospace and defense industries. The company has a global presence across the U.S., Asia, Europe, the Middle East, and Africa.

Rolls-Royce Receives Favorable Ratings

Recently, Rolls-Royce stock received backing from six analysts, who confirmed their Buy ratings.

Yesterday, UBS analyst Ian Douglas reiterated his Buy rating on RR stock and raised his price target from 400p to 550p. The new price target suggests a growth potential of 30%. Douglas is highly confident about Rolls-Royce’s turnaround strategy and believes the company has the potential to surpass its forecasts through 2027.

Similarly, Goldman Sachs analyst Victor Allard also recommended buying RR stock, forecasting an upside of 24%. Allard is bullish due to factors like the performance of the Civil Aerospace division and upward revisions of earnings and cash flow forecasts.

In 2023, the company’s Civil Aerospace segment contributed nearly half of the total revenues of £15.4 billion. Additionally, this segment experienced a significant rise in its operating margin, climbing to 11.6% from 2.5% in 2022. Allard further emphasized the growth potential of this sector, indicating that the market may not be fully appreciating its value.

Rolls-Royce’s Promising Outlook

In 2024, Rolls-Royce expects its underlying operating profit to be between £1.7 billion and £2.0 billion, up from £1.6 billion in 2023. Free cash flow is expected in the range of £1.7 billion to £1.9 billion, compared to £1.3 billion in 2023.

Additionally, the company projects significant growth in its large EFHs (engine flying hours) in civil aerospace, targeting 100-110% of the 2019 level. Last year, EFHs had already rebounded to 88% of their 2019 levels.

Is Rolls-Royce Stock a Buy?

While several analysts maintain a bullish outlook on Rolls-Royce stock, the average price target indicates that the potential for share price upside is limited, given that the stock is already trading at elevated levels.

According to TipRanks, RR stock has received a Moderate Buy consensus rating based on a total of 10 recommendations, of which eight are Buys. The Rolls-Royce share price forecast is 415.52p, which is similar to current trading levels.



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