Rolls-Royce shares are champion of FTSE 100, analysts say
Rolls-Royce shares have become one of the London Stock Exchange’s crown jewels after showing no sign of slowing down its rapid rise.
The stock has climbed over 53 per cent since the beginning of the year and nearly doubled from its standing 12 months ago.
The firm’s latest rally came on Tuesday after it was named the winning bidder for UK small nuclear reactors. Shares jumped over one per cent to 897.80p on the news.
The announcement came from Great British Energy, which said Rolls-Royce SMR was the preferred bidder for its programme to build small modular nuclear reactors.
The group’s small modular reactor arm is in the third stage of its regulatory process from the Office for Nuclear Regulation, after completing initiation and fundamental assessment procedures. The assessment of its reactor design is ongoing.
Rolls-Royce’s market cap notched a new high above £75bn putting it a stone throw away from entering the FTSE 100’s top five most valuable companies.
Lale Akoner, global market analyst at eToro, told Morning Wire: “We think that Rolls-Royce isn’t just a standout; it’s arguably the FTSE 100’s MVP, with a rally backed by substance and a pipeline that keeps delivering.”
Rolls-Royce vital to FTSE 100
Akoner said: “Rolls-Royce has become a vital engine of the FTSE 100.
“By some estimates, it accounted for around a fifth of the FTSE’ s total 2024 return – remarkable for a stock that started with modest index weight.”
She said Rolls-Royce performance has “repeatedly pulled the FTSE higher” helping to offset the underwhelming performance of “traditional heavyweights like Shell and HSBC.”
The Derby-headquartered company posted £18.9bn in revenue for 2024, with operating profit jumping to £2.9bn from £1.9bn the year previous.
“Its transformation under chief executive Tufan Erginbilgiç, boosted by strong civil aviation recovery, defence spending, and reinstated dividends, has made it the market’s most compelling turnaround story,” Akoner added.
Morning Wire reported in January that brokers had argued Rolls-Royce shares could climb up to 820p in the next three years – a target the firm quickly smashed in late May.
Rolls-Royce stock suffered a blow in early April after President Donald Trump’s ‘Liberation Day’ tariffs sent markets into a tailspin.
Shares fell to a low of 635.8p on April 7 with £10 wiped off its market capitalisation.
But the firm stormed back marking a recovery from tariff woes at the beginning of May.
Analysts have told Morning Wire the FTSE 100 constituent has accounted for a large share of the flood of cash into large-cap European equities after a selloff of US stocks.