Shares of Rolls-Royce (OTHEROTC:RYCEF) (GB:RR) surged to a four-year high after it gained nearly 7% in today’s trading. The surge comes after the UK jet engine manufacturer disclosed plans to boost its profit and free cash flow in the next four years.
Indeed, Rolls-Royce Chief Executive Officer Tufan Erginbligic noted these plans during a live presentation to investors on Tuesday. Rolls-Royce said it would increase its operating profit to £2.8 billion in four years. For reference, its operating profit in 2022 was £789 million. Furthermore, the company projects free cash flow could triple from this year to £3.1 during the same period while achieving an 18% return on capital.
“We’re looking to recreate a new Rolls-Royce which is high performing, competitive, resilient, and a growing company,” Erginbilgic said. “We’ll unlock our full potential as we translate engineering excellence into strong financial performance.”
Alongside these plans, the firm disclosed that it would sell off assets, which includes its electric aircraft division, and cut jobs to save costs and drive profitability. As many as 2,500 job cuts, representing about 6% of its global workforce, are expected.
The ambitious profit target is the centerpiece of a long-awaited shake-up led by Erginbilgic, a former BP executive who was appointed CEO in January to assist Rolls-Royce in rebounding from the pandemic and previous restructurings.
Is Rolls-Royce a Good Stock?
With six Buys and two Holds, RYCEF stock commands a Strong Buy consensus rating on TipRanks. The average Rolls-Royce price target of $3.73 implies a 13.72% upside potential from current levels. Meanwhile, RYCEF shares have rallied 157.14% so far this year.