Rolls-Royce Holdings PLC (LSE:RR.) could reveal some disappointing numbers in interim results later this summer and will need to be cautious on its future guidance, according to UBS.
Its aeroplane engines are expected to have notched up between 6.2mln and 6.4mln flying hours during the first half of the year, the Swiss bank anticipates, coming in between 83% and 85% of pre-pandemic levels.
“We are concerned it may be below investor expectations” of around 85%, analysts said, with a seasonal uptick in long-haul flight times yet to happen.
Forming an important element of its total revenues, Rolls-Royce is paid based on the number of hours flown by its engines.
Shortages of aircraft, made worse by delays from key suppliers Airbus and Boeing, are a key factor in the lower-than-expected figure, the analysts explained.
“This June weakness is consistent with the industry narrative of capacity constraint [...] or narratives around airlines prioritizing price over volume currently.”
Even so, these first-half figures are still mean the company remains on course to meet between 80% and 90% of 2019 times.
UBS added that Rolls-Royce would have to be cautious when discussing future guidance, given the FTSE 100 firm’s “investment case centres on the company regaining […] trust”.
“Any indicators that guidance is at risk would receive significant focus,” analysts continued, reassuring long-term predictions are unlikely to be hit.
UBS has a ‘buy’ rating on Rolls-Royce with a share price target of 200p, which is 28% above Wednesday’s close of 155.8p.