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Rolls-Royce (RYCEY) AI Stock Analysis

RYCEY

Rolls-Royce

(Other OTC:RYCEY)

Select Model
Rating:73Outperform
Price Target:$18.50â–²(7.62% Upside)
Action:reiterated
Date:08/30/26

The company's exceptional financial turnaround and strong cash generation are the primary drivers of the score. Technical trends are supportive with the stock trading above all major moving averages. However, the high P/E ratio and slowing revenue growth present notable risks, capping the overall assessment.

Positive Factors
Revenue GrowthThe substantial expansion in revenue demonstrates a stronger business base and improved commercial scale over multiple years. A larger installed fleet and broader revenue foundation can support recurring service demand, investment capacity, and more durable earnings power across the next several quarters.
Negative Factors
Meaningful LeverageAlthough equity returned to positive territory, debt remains high relative to the capital base. Meaningful leverage can reduce financial flexibility, increase pressure on cash allocation, and make the company more vulnerable if earnings weaken or working-capital requirements rise.

Rolls-Royce (RYCEY) vs. SPDR S&P 500 ETF (SPY)

-20%-10%0%10%20%30%40%50%RYCEY+14.41%SPY+12.58%Dec '25Jan '26Feb '26Mar '26Apr '26May '26Jun '26Jul '26Aug '26Sep '26Oct '26Nov '26
Market Cap
$140.25B
Dividend Yield
0.87%
Average Volume (3M)
1.77M
Price to Earnings (P/E)
35.5
Beta (1Y)
1.03
Revenue Growth
23.00%
EPS Growth
-45.26%
Country
US
Employees
43,162
Sector
Industrials
Sector Strength
63
Industry
Aerospace & Defense

Rolls-Royce Business Overview & Revenue Model

Company Description

Rolls-Royce Holdings plc operates as a prominent global industrial technology corporation, headquartered in London, United Kingdom, since its founding in 1884. The company's diverse activities are organized into four key divisions: Civil Aerospace, P...

How the Company Makes Money

Rolls-Royce makes money primarily by selling aerospace engines and, critically, by providing long-term aftermarket services that generate recurring revenue over the life of an engine. A major portion of its economics comes from servicing arrangements...

Rolls-Royce Earnings Call Summary

Earnings Call Date:Feb 25, 2026(Q4-2025)|% Change Since:-2.25%|Next Earnings Date:Feb 24, 2027
Earnings Call SentimentPositive

The call presents a strongly positive operational and financial transformation story: significant revenue, profit and free cash flow growth in 2025, upgraded midterm targets, major LTSA and aftermarket margin improvements, a substantial multiyear buyback and rising shareholder distributions. Challenges remain—notably supply‑chain and product cost inflation, near‑term shop‑visit and LTSA timing effects, higher investments and some one‑off accounting impacts—but management provides clear plans and targets to mitigate these and highlights that much of the LTSA cash upside will accrue beyond the midterm. Overall, the positive achievements and upgraded guidance outweigh the headwinds.

Positive Updates

Group Revenue and Profit Growth
Group revenue grew 14% to GBP 20.0 billion and group operating profit rose ~40% to GBP 3.5 billion (5x vs 2022). Operating margin improved by 3.2 percentage points to 17.3%.

Negative Updates

Ongoing Supply Chain Headwinds and Product Cost Inflation
Industry supply‑chain constraints persist into 2026 with product cost inflation; management expects supply chain cash drag to continue through 2026 and be gone only by the midterm. An additional charge of GBP 161 million (mostly H1) related to product cost inflation was recorded.

Company Guidance

Rolls‑Royce guided to 2026 underlying operating profit of £4.0–4.2bn and free cash flow of £3.6–3.8bn (noting a continuing supply‑chain headwind that should be gone by the midterm), with net LTSA balance growth broadly similar to 2025, large‑engine flying hours of 115–120% of 2019, shop visits of 1,480–1,550 and an expected supply‑chain cash drag of c.£150–200m; they flagged higher net investments, an outflow on provisions and cash tax c.£200m higher versus 2025. For the 2028 midterm they upgraded targets to operating profit £4.9–5.2bn, operating margin 18–20%, free cash flow £5.0–5.3bn and return on capital 23–26%; divisional midterm margins include Civil Aerospace 21–23% (installed fleet growth 6–7% p.a.), Power Systems 18–20% (OE growth in Power Gen and Governmental ~20% p.a.), and Defence 14–16%. They expect net LTSA balance growth of c.£0.8–1.2bn to midterm with large‑engine flying hours rising to 130–140% of 2019 and shop visits peaking in 2026 then falling to 1,300–1,400 in 2028, assume a blended FX of ~$1.33/£ (vs $1.44 in 2025), and built in material LTSA margin upside (contract margins up ~19pp 2022–28 with an incremental +2pp contract and +8pp LTSA improvement vs prior targets); capital returns include a £7–9bn buyback program 2026–28 (£2.5bn in 2026 including £200m already executed) alongside a 2025 final dividend of 5p (full year 9.5p, 32% payout) and a commitment to return >75% of FCF 2026–28.

Rolls-Royce Financial Statement Overview

Summary

Strong financial recovery with four years of revenue growth, dramatically improved margins (net margin 27.5%), and robust free cash flow conversion (86%). Balance sheet has strengthened with debt reduction and positive equity, though equity remains thin and revenue growth is decelerating.

Income Statement

90Very Positive

Balance Sheet

80Positive

Cash Flow

85Very Positive
Financial statement breakdown
BreakdownTTMDec 2025Dec 2024Dec 2023Dec 2022Dec 2021
Income Statement
Total Revenue23.09B21.21B18.91B16.49B13.52B11.22B
Gross Profit6.62B6.17B4.22B3.62B2.76B2.14B
EBITDA6.55B4.47B3.48B3.74B1.71B1.48B
Net Income3.03B5.71B2.52B2.41B-1.27B120.00M
Balance Sheet
Total Assets39.01B38.05B35.69B31.51B29.45B28.67B
Cash, Cash Equivalents and Short-Term Investments6.50B6.51B5.36B3.52B2.40B2.55B
Total Debt4.37B4.27B5.13B5.76B5.96B7.78B
Total Liabilities36.12B35.36B36.57B35.14B35.47B33.31B
Stockholders Equity2.85B2.72B-912.00M-3.68B-6.05B-4.66B
Cash Flow
Free Cash Flow4.42B3.68B2.90B1.77B1.25B-818.00M
Operating Cash Flow5.08B4.29B3.78B2.48B1.85B-259.00M
Investing Cash Flow-885.97M-885.17M-831.00M-726.00M826.00M-428.00M
Financing Cash Flow-3.79B-2.77B-1.05B-549.00M-2.87B-88.00M

Rolls-Royce Technical Analysis

Technical Analysis SentimentNegative
Last Price17.19

Price Trends

50DMA18.93Negative
100DMA19.11Negative
200DMA17.84Negative

Market Momentum

MACD-0.66Negative
RSI42.77Neutral
STOCH62.47Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RYCEY, the sentiment is Negative. The current price of 17.19 is below the 20-day moving average (MA) of 17.53, below the 50-day MA of 18.93, and below the 200-day MA of 17.84, indicating a bearish trend. The MACD of -0.66 indicates Negative momentum. The RSI at 42.77 is Neutral, neither overbought nor oversold. The STOCH value of 62.47 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RYCEY.

Rolls-Royce Peers Comparison

Overall Rating

UnderperformOutperform
Sector (63)

Financial Indicators

RYCEY against its peers
NameOverall RatingMarket CapP/E RatioROEDividend YieldRevenue GrowthEPS Growth
HONAHONA78Outperform$48.87B26.37-221.47%―8.36%-32.92%
HEIHEI76Outperform$37.93B55.5218.30%0.04%20.69%31.56%
RYCEYRYCEY73Outperform$137.35B35.45108.91%0.87%23.00%-45.26%
GEGE71Outperform$311.87B36.2750.64%0.56%19.62%15.45%
RTXRTX71Outperform$269.62B32.5512.77%1.39%11.63%26.50%
Sector *63Neutral$10.79B15.437.44%2.01%2.89%-14.66%
SAROSARO62Neutral$7.74B25.3812.12%―12.56%144.85%

* Industrials Sector Average

Performance Comparison

-20%0%20%40%RYCEYGEHEIRTXSAROHONADec '25Jan '26Feb '26Mar '26Apr '26May '26Jun '26Jul '26Aug '26Sep '26Oct '26Nov '26
RYCEY and its peers over the selected period
Show on chartTickerCompany NamePriceChange% Change
RYCEYRolls-Royce Holding PLC17.122.2715.31%
GEGe Aerospace315.7813.214.37%
HEIHEICO Corporation337.5921.656.85%
RTXRtx Corporation202.7929.7517.19%
SAROStandardAero, Inc.25.13-2.37-8.62%
HONAHoneywell Aerospace Inc157.95-42.05-21.03%
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.

Date of analysis: Aug 29, 2026