Rolls-Royce Holdings PLC (LSE:RR.) the results are "very strong" according to the City analyst community, but some said the shares are benefitting from an element of 'luck'.
Underlying profits and free cash flow for the FTSE 100-listed engine maker in 2024 were well ahead of expectations, said UBS, with 2025 guidance also a "beat" and 2028 guidance looking "significantly ahead of investor expectations".
The Civil Aerospace arm's second-half performance beat the consensus by 15%, based on onerous contract provision reversals and catch-ups, which analysts at the Swiss bank said suggested "the quality of the beat is high".
New guidance for 2025 of EBIT and FCF both between £2.7 billion and £2.9 billion is ahead of the analyst consensus.
"Whilst flying hour assumptions appear to have been held broadly stable, operational improvements, including time on wing, appear to have driven the upgrades."
"Expectations were high into the print but we believe 2028 guidance especially is strong, and the strength appears broad based across the business," said UBS.
Garry White at broker Charles Stanley says CEO Tufan Erginbilgic is "demonstrably having significant success", with cash management improved, waste eliminated and the share price sent to all-time highs.
"The blue-chip company has also returned to the dividend list after a five-year post-Covid hiatus with a higher-than-expected payout."
Erginbilgic also had a "substantial amount of 'luck' - which came in the strange form of Vladimir Putin and Donald Trump", he says, as the invasion of Ukraine and the US reluctance to fund more defence spending on the Continent leading to "a perfect storm for sales teams in the defence industry".
At Panmure Liberum/Agency Partners, analyst Nick Cunningham said guidance to the number of overhauls is higher in 2025 and 2028 than his forecasts, which helps to explain higher profits, as revenue and profit is recognised on work done, not flight hour receipts.
It implies lower cost per overhaul, "which helps both profits (assumed margin on contract will go up) and cashflow (less cash out on each overhaul)".
Overall, Cunningham said they were "very strong results, supportive of our targets and recommendation, and of our assumption, underlying our medium-term targets, that RR will be rerated to at least match European peers Safran and MTU".