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On Thursday, Redburn-Atlantic analyst Olivier Brochet increased the price target for Rolls-Royce Holdings Plc (LON:RR:LN) (OTC: RYCEY) to GBP9.40, up from GBP6.90, while maintaining a Buy rating on the stock. The adjustment follows the company’s full-year 2024 earnings release, which included an improved mid-term outlook. The stock, currently trading at $10.81, has shown remarkable momentum with a 126% return over the past year, according to InvestingPro data.
Brochet’s updated financial model reflects a significant revision of estimates, a move he had not anticipated after a series of strong upgrades in the past two years. He has raised the earnings per share (EPS) estimates for the years 2025 to 2028 by 10%, 9%, 16%, and 23%, respectively. Additionally, the free cash flow (FCF) forecasts for these years have been increased by 17%, 12%, 12%, and 32%. The company’s financial health appears robust, with InvestingPro assigning it a "GREAT" overall score of 3.32 out of 5, though current valuations suggest the stock may be trading above its Fair Value.
The analyst’s revised FCF expectations for 2025 are 9% higher than the company’s mid-range guidance, projecting £3.06 billion compared to the guided range of £2.7 to £2.9 billion. For 2028, the FCF forecast aligns with the company’s range of £4.2 to £4.5 billion, with Brochet’s estimate at £4.3 billion.
At the operating profit level, the updated figures are 10% above the mid-range of Rolls-Royce (OTC:RYCEY)’s guidance for 2028, which stands at £3.6 to £3.9 billion. The positive adjustments to the financial model are based on the company’s latest earnings and forward-looking statements.
In other recent news, Rolls-Royce Holdings Plc has been in the spotlight with several key developments. The company secured a significant GBP9 billion Unity contract with the U.K. Ministry of Defence, reinforcing its role in the defense sector, particularly in maintaining and developing nuclear submarine capabilities. CFRA analyst Alan Lim Seong Chun responded to this by raising the price target for Rolls-Royce to GBP7.00 from GBP6.00, maintaining a Hold rating. The analyst cited the contract’s long-term visibility as a positive factor and adjusted the 2025 earnings per share forecast to GBP0.23 from GBP0.22.
Meanwhile, Citi analysts have downgraded Rolls-Royce from a Buy to a Neutral rating, despite increasing the price target to GBP6.41 from GBP5.55. This adjustment follows a strong recovery from the Covid-19 pandemic, with Citi noting that the stock is nearing its fair value. They acknowledged Rolls-Royce’s ability to generate cash flow higher than its profits, highlighting the company’s unique business model. However, the analysts suggest that the expected upside is not sufficient to maintain a Buy rating at this time.
Both CFRA and Citi’s analyses provide investors with updated perspectives on Rolls-Royce’s financial health and market position. These recent developments reflect the evolving nature of the company’s business and its ongoing recovery efforts.
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