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On Thursday, CFRA analyst Alan Lim Seong Chun upgraded Rolls-Royce Holdings Plc (LON:RR:LN) (OTC: RYCEY) stock rating from Buy to Strong Buy, maintaining a price target of GBP9.00. The upgrade reflects confidence in the company’s ongoing transformation into a more profitable and cash-generative business. The market has already recognized this transformation, with the stock delivering an impressive 103% return over the past year and currently trading at $10.31. According to InvestingPro analysis, the company maintains a GREAT financial health score, supporting the analyst’s bullish stance.
The analyst’s valuation is based on an EV/EBITDA multiple of 23.0x, which is +2.5 standard deviations above the average five-year forward EV/EBITDA, suggesting a premium that CFRA believes is warranted. Current InvestingPro data shows an EV/EBITDA of 21.85x and strong revenue growth of 14.7% in the last twelve months. The firm’s positive outlook is supported by Rolls-Royce (OTC:RYCEY)’s strong operational turnaround, robust free cash flow (FCF) generation, and long-term growth catalysts in its civil aerospace, defense, and power systems divisions.
In its latest trading update, Rolls-Royce reported that all divisions have performed well, even amid external challenges. The company’s transformation efforts are showing tangible results, with a solid performance across its business segments and the retention of its full-year guidance.
CFRA has kept its earnings per share (EPS) forecasts for Rolls-Royce at GBP0.24 for 2025 and GBP0.27 for 2026. These projections are indicative of the analyst’s confidence in the company’s future financial performance and its ability to maintain positive momentum.
In other recent news, Rolls-Royce has received upgrades from both Moody’s and Fitch Ratings, reflecting its improved financial performance. Moody’s upgraded Rolls-Royce’s long-term issuer ratings from Baa3 to Baa2, citing strong operating profits and cash flow improvements. Fitch also upgraded Rolls-Royce’s Long-Term Issuer Default Rating to ’BBB+’ from ’BBB-’, highlighting a robust EBITDA margin of 16.4% and a positive outlook for further profitability enhancements. Additionally, Rolls-Royce reported a substantial increase in operating profit to GBP2.5 billion in 2024, up from GBP1.6 billion in 2023, alongside a revenue rise of over 15% to GBP17.8 billion. The company’s free cash flow also saw a significant boost, reaching GBP2.4 billion in 2024 from GBP1.3 billion the previous year. Redburn-Atlantic analyst Olivier Brochet raised the stock price target for Rolls-Royce to GBP9.40, following the company’s positive earnings report and improved mid-term outlook. Brochet adjusted earnings per share estimates upwards by up to 23% for the years 2025 to 2028. Rolls-Royce’s strong liquidity position, with GBP8.1 billion at the end of 2024, supports its ongoing financial stability.
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