Rolls-Royce shares could soar 50 per cent, says BofA
Shares in engineering giant Rolls-Royce could rise a further 50 per cent following an already stellar two-year rally, analysts at Bank of America have said.
Analyst Benjamin Heelan on Friday lifted his price target to 1,150p from 830p, according to Bloomberg, prompting shares to rise over three per cent by mid-day.
It came just a day after the London-listed firm brought back dividend payouts for the first time since the pandemic and unveiled a £1bn share buyback programme.
The arrival of boss Tufan Erginbilgic in January 2023 began an exceptional turnaround at a company that teetered on the edge of bankruptcy during the Covid-19 pandemic.
A combination of booming travel demand and increasing military spending around the globe has created huge demand for Rolls’ jet engines and defence technology.
Heelan said the firm had benefited from strong deliveries, pricing and an improvement in the measure of reliability of its engines.
Travel demand has shown no signs of slowing over the last year, with a string of airlines including British Airways owner the IAG posting record profit.
Prime Minister Sir Keir Starmer unveiled the biggest increase in defence spending since the Cold War on Tuesday. It is set to rise to 2.5 per cent of GDP from April 2027, with an ambition to reach three per cent by the parliament.
Rolls-Royce is aiming for a profits of between £3.6bn and £3.9bn by 2028 and free cash flow of between £4.2bn and £4.5bn.
Shares are up more than 100 per cent over the last 12 months.
“We are moving with pace and intensity,” Erginbilgic said in a statement on Thursday.
“Based on our 2025 guidance, we now expect to deliver underlying operating profit and free cash flow within the target ranges set at our Capital Markets Day, two years earlier than planned.”