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Rolls-Royce up 2.7% after upgrade; turnaround potential underestimated, says bank

Published 21/03/2024, 12:46
© Reuters.  Rolls-Royce up 2.7% after upgrade; turnaround potential underestimated, says bank
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Proactive Investors - Shares in Rolls-Royce Holdings PLC (LON:RR) were up 2.7% after UBS raised its price target on Rolls-Royce PLC to 550p from 400p and repeated its 'buy' advice.

The new valuation, predicated on the aero-engine maker's turnaround, stands at a 32% premium to the current price of 417.69, up 10.99p on the day.

it comes after Rolls' latest quarterly results and positive interactions with management, instilling confidence in the company's future performance.

UBS's report highlights several reasons for optimism, including Rolls-Royce's successful margin improvement initiatives and conservative management forecasts for engine flying hours (EFH) up to 2027.

UBS believes that these forecasts, particularly for the Trent 700 engine's retirement rates and daily flying hours, are unduly cautious and that actual performance could surpass expectations.

Despite some challenges, such as the ongoing issues with the Trent 1000 engine and ambitious plans for working capital reduction, UBS sees Rolls-Royce's management as capable of navigating these obstacles.

Furthermore, UBS said the positive market sentiment surrounding the stock is deemed justified by its strong recovery potential.

Read more on Proactive Investors UK

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