On Wednesday, Citi expressed a positive stance on Rolls-Royce Holdings Plc (LSE:LON:RR), maintaining a Buy rating and a price target of £4.31. The firm anticipates that the company may project significant growth for 2024 in Engine Flight Hours (EFH), potentially reaching 100-110% of the 2019 levels, compared to the 80-90% expected in 2023. This projection is set to be discussed during Rolls-Royce (OTC:RYCEY)'s full-year 2023 results on February 22.
The optimism stems from recent data indicating a substantial rise in widebody engine cycles for Rolls-Royce, which not only surpassed historical figures but also outperformed those of its competitor, General Electric (NYSE:GE). In January, Rolls-Royce's flight cycles increased by 3% relative to 2019, a notable improvement from the 8% decrease observed in December. Meanwhile, General Electric's widebody cycles fell by 5% in January compared to 2019, which also marked an improvement from the 9% decrease in December.
Citi's outlook is further bolstered by the overall growth trend in 2019, suggesting that the recent upswing could lead to even more robust growth moving forward. The comparative growth against General Electric also indicates a potential market share gain for Rolls-Royce, which had been obscured during the COVID-19 pandemic due to high freighter usage, where Rolls-Royce holds a lower market share.
The firm's analysis projects that if these trends continue, Rolls-Royce's mid-term target for 2027, aiming for 120-130% of the 2019 EFH levels, appears increasingly achievable. The data used in Citi's assessment was derived from their engine monitor report, which was published on the same day and highlighted the performance of Rolls-Royce's widebody cycles.
Investors and stakeholders in Rolls-Royce are likely to watch closely as the company presents its full-year results later this month, which will provide further insights into the company's financial health and its ability to meet the projected growth targets in the coming years.
InvestingPro Insights
Rolls-Royce Holdings Plc (OTC:RYCEY) has been a topic of interest among investors, particularly with the upcoming full-year 2023 results. As Citi maintains a bullish stance on the company, recent data from InvestingPro provides additional insights into the company's financial performance and market position.
InvestingPro Data indicates a substantial market capitalization of $32.69 billion USD, reflecting the company's significant presence in the industry. The P/E ratio stands at a moderate 16.88, suggesting that the stock is reasonably valued in relation to its earnings. Notably, the company has experienced impressive revenue growth over the last twelve months as of Q2 2023, with a 32.46% increase, which supports Citi's optimism regarding the company's growth trajectory.
Among the InvestingPro Tips, it's highlighted that Rolls-Royce is expected to see net income growth this year, which aligns with Citi's projections of increased Engine Flight Hours. Additionally, the company's role as a prominent player in the Aerospace & Defense industry cannot be understated, especially as it demonstrates strong returns over the last three months and a large price uptick over the past six months.
For investors looking for more comprehensive analysis and additional InvestingPro Tips, there are over 10 detailed insights available on Rolls-Royce Holdings Plc at Investing.com/pro/RYCEY. To access these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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