Rolls-Royce Holdings PLC's (LSE:RR.) restructuring programme and the eventual return to pre-pandemic civil aircraft flying times look set to fuel up returns and plot the aerospace firm on a path to recovery, say Shore Capital analysts.
The FTSE 100 group's defence and engine divisions provide “high-margin potential and strong cash generation” potential, the bank said, while the growing opportunities in small modular reactors and the eventual need to electrify aircraft engines could also stand it in good stead.
“We view Rolls-Royce as a compelling recovery play with robust end-markets,” said Shore Cap, also hinting towards future upgrades if its outlook improves.
Shore Cap rated Rolls-Royce Holdings PLC (LSE:RR.) a ‘buy,’ forecasting its share price to climb to 130p, up from 108p on Friday.
Rolls-Royce appointed new chief executive Tufan Erginbilgic early this year, amid a reshuffle aimed at revitalising the company, which currently faces £5.1bn worth of debt.
It will report full-year results on 23 February, possibly clarifying its moves to “drive further cost efficiencies,” including through widely anticipated job cuts.
“As debt is paid down and efficiencies are realised, we see much-improved returns on capital, translating into 2025 earnings per share of 7.6p and a growing dividend,” Shore Cap added.