Deutsche Bank (ETR:DBKGn) has increased its outlook on Rolls-Royce Holdings PLC (LSE:LON:RR.)’s share price to reflect free cash flow and earnings estimates, as well as updated sector assumptions.
Deutsche analyst Christophe Menard noted that a potential catalyst could be an update of Rolls-Royce’s 2027 targets in February 2025, as consensus figures already surpass the company’s existing targets.
Menard reckons Rolls-Royce's current valuation of around 17x enterprise value to forward EBIT provides further upside.
However, the aerospace company must advance its transformation programme to align its valuation metrics with competitors like General Electric (NYSE:GE).
Nonetheless, Deutsche maintained a buy rating on the stock with a share price target upgraded from 555p to 630p.
This target will likely be supported by what JPMorgan (NYSE:JPM) sees as a “new era” of share buybacks in the aerospace and defence sector.
This is one of the reasons that the European A&D sector "has never been this attractive", the JPM recently said, citing long-term growth drivers across civil aerospace and defence markets.