Financial Trading Blog
Rolls-Royce Off 70% YTD Highs
Airlines have been showing remarkable recovery, with some brushing off concerns about a recession, supporting Rolls Royce's engine division. Are any clouds on the horizon?
Airlines Add to Optimism
Analysts are highly optimistic about Rolls Royce as the global airline industry rebounds and aircraft engine demand rises. Only have a negative rating for the company, and the consensus is for another jump in profitability in the current quarter. Airlines are notoriously bullish about their prospects for the rest of the year, such as United's CEO dismissing concern about a pending recession. Long-haul air travel is as China resumes international commercial flights after a nearly three-year hiatus.
Airlines are also buying up of as the pandemic is over, including hundreds of new long-haul, wide-body aircraft. Rolls Royce's Trent engines hold a dominant position in the long-haul space, which could support growth for the company over the coming years. Most recently, the company in this sector, seeing recovery in civil aviation returning to the 80-90% of pre-covid activity range.
It's Not Just Jet Engines
While sales in civil aviation have been doing good, the company's segment has an operating margin of just 2.5%. It does represent nearly of the company's revenue. The second largest segment is defence, with an almost five times higher operating margin at almost 12%. The war in Ukraine has increased demand for defence spending worldwide, and the UK has vowed to increase the supply of more sophisticated weapons systems. For now, the UK MoD is supplying out of existing inventory, but at some point, that will presumably have to be replaced, which could give Rolls Royce another boost.
The company's latest trending update on the annual meeting analysts a bit in simply reaffirming guidance instead of affirming the more optimistic view by raising the outlook as some had expected. The new CEO, Tufan Erginbilgic, seems to be more cautiously approaching the company's outlook. Better to underguide and overperform than overguide and miss expectations if the feared recession does materialise.
RR Appears in Consolidation Phase
Rolls Royce soared as high as 70% YTD in March but slowed to around 60% near 150 GBX recently. The spike to 160 broke a multiyear range above 150 GBX, but prices falling below the said barrier have opened room for bearish speculation.
It's easy to open an account
- Fill in our simple online application form
- Fund your account
- Start trading the global markets instantly!
SEARCH FOR AN ARTICLE:
Enter a keyword and search for all relevant articlesMARKET ANALYSIS
RECENT POSTS
DISCLAIMER
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investors lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. For professional clients, spread betting and CFD trading can also result in losses larger than your initial stake or deposit.
Spreadex Ltd is authorised and regulated by the Financial Conduct Authority, provides an execution only service and does not provide advice in any way. Nothing within this update should be deemed to constitute the provision of investment advice, recommendations, any other professional advice in any way, or a record of our trading prices. This update does not constitute or form part of an offer of, or solicitation for a transaction in any financial instrument, nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract therefore. Any persons placing trades based on their interpretation of the comments or information within this update does so entirely at their own risk.
No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained within this update by Spreadex Ltd or any of its employees and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained within this update.
The information contained within this update is the intellectual property of Spreadex Ltd and is protected by UK and International copyright laws. All rights reserved. Users may however freely download, distribute and reproduce extracts of the contents, subject always to accrediting Spreadex Ltd as the source and providing a hyperlink to machibet77.com.
