Analysts at CFRA expressed a positive outlook on the contract, noting its importance in providing long-term visibility for Rolls-Royce (OTC:RYCEY)’s Submarines program and cementing its status as an integral contributor to the defense sector. In light of the recent developments, CFRA has maintained its 2024 earnings per share (EPS) estimate for Rolls-Royce at GBP0.19 and raised the 2025 EPS forecast to GBP0.23 from GBP0.22.The analyst’s endorsement of the Hold rating is grounded in Rolls-Royce’s demonstrated ability to secure transformative contracts and its prospects for consistent earnings growth over the next three to five years. The expectation of improved cash flow and a strengthening balance sheet, particularly in the fourth quarter of 2024 and throughout 2025, further supports the analyst’s perspective on the company’s financial health. InvestingPro analysis reveals robust revenue growth of 15.4% and healthy profitability with $2.95 billion in net income. For deeper insights into Rolls-Royce’s financial metrics and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. InvestingPro analysis reveals robust revenue growth of 15.4% and healthy profitability with $2.95 billion in net income. For deeper insights into Rolls-Royce’s financial metrics and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The price target adjustment comes in the wake of Rolls-Royce securing a substantial GBP9 billion Unity contract with the U.K. Ministry of Defence (MoD). This eight-year agreement is pivotal for the company as it reinforces its crucial role in maintaining and developing the U.K.’s nuclear submarine capabilities. With a market capitalization of $64 billion and a strong financial health score of GREAT on InvestingPro, the company appears well-positioned to execute on this significant contract.
Analysts at CFRA expressed a positive outlook on the contract, noting its importance in providing long-term visibility for Rolls-Royce’s Submarines program and cementing its status as an integral contributor to the defense sector. In light of the recent developments, CFRA has maintained its 2024 earnings per share (EPS) estimate for Rolls-Royce at GBP0.19 and raised the 2025 EPS forecast to GBP0.23 from GBP0.22.
The analyst’s endorsement of the Hold rating is grounded in Rolls-Royce’s demonstrated ability to secure transformative contracts and its prospects for consistent earnings growth over the next three to five years. The expectation of improved cash flow and a strengthening balance sheet, particularly in the fourth quarter of 2024 and throughout 2025, further supports the analyst’s perspective on the company’s financial health.
In other recent news, Rolls-Royce Holdings Plc (LON:RR) has been in the spotlight following a downgrade of its stock rating from Buy to Neutral by Citi analysts. The change, which comes despite a 95.43% return over the past year, reflects a belief that the stock is nearing its current fair value. Alongside the downgrade, Citi has increased its price target for Rolls-Royce to GBP6.41 from GBP5.55, signaling some potential for growth but not enough to maintain a Buy rating.
The revision comes as Rolls-Royce demonstrates a strong recovery from the Covid-19 pandemic, reflected by a financial health score of 3.14. The company’s unique business model, which anticipates cash flow significantly higher than its profits, has led to its shares trading at the upper end of profit multiples compared to peers. Moreover, Rolls-Royce has shown robust revenue growth of 15.42% in the last twelve months.
Despite the downgrade, Citi’s valuation method emphasizes the importance of cash over profits, suggesting Rolls-Royce could trade at a discount relative to its cash fair value. These recent developments provide investors with a revised outlook on Rolls-Royce as the market continues to evolve.
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