Rolls-Royce share price jumped by over 5% and was the best-performing company in the FTSE 100 Index after publishing strong financial results. It jumped to 1,462p, up by nearly 10% from the lowest point this month.
Rolls-Royce Holdings jumps as revenue soars
RR stock jumped after the company published strong financial results. Its revenue jumped to £11.27 billion in the year’s first half from £9.05 billion in the same period last year. This surge happened even as the US-Iran war brought air travel in some key areas to a halt.
Rolls-Royce said that its operating profit jumped to £2.5 billion from £1.73 billion in the same period last year. This jump happened even as the cost of doing business soared, with the prices of key metals like aluminium soared. Its profit before taxation jumped to over £2.4 billion.
Most importantly, the company announced that it was boosting its forward guidance. It now expects that its operating profit will jump between £4.7 billion and £4.9 billion, respectively. Its free cash flow is expected to jump between £3.8 billion and £4 billion. In a statement, the CEO said:
“In Civil Aerospace, where we continued to improve our aftermarket profitability, we have also effectively eliminated aircraft on ground, providing a significant operational benefit to our customers. In Defence, we continued to establish our leading position in autonomous propulsion.”
Most notably, as other large industrial companies, Rolls-Royce is benefiting from the ongoing data center boom. It is growing its market share in key areas, including backup power, where its generators are being used by top hyperscalers.
Also, the company is gaining share in the Small Modular Reactor (SMR) industry. Analysts believe that the SMR industry has more growth to continue. A recent report showed that its market size stands at $6.8 billion, and will have a CAGR of 6.8%, reaching over $10.7 billion in 2033.
Narrow body engine growth
Rolls-Royce is now seeking for more ways to grow its business. For example, as we have written before, the management is aiming to re-enter the narrow-body engine business that it exited a decade ago. Such an entry will be a big one because of the rising demand for narrow body planes.
Indeed, airplanes like Airbus A320neo and Boeing 737 MAX have become the best-selling planes this year. As such, there is a room for the company to gain some market share in the industry in the coming years.
There are two caveats on this: cost and time. The project will consume billions of pounds, which the company needs to raise. It is unclear whether the Andy Burnham administration will be willing to offer the finances to a company now valued at over $154 billion.
The other is that this business will take many years before it starts making money. Estimates are that it will take over five years for the program to start generating an income.
Rolls-Royce stock price technical analysis
RR stock price chart | Source: TradingView
Technicals suggest that the RR stock price has jumped in the past few days, and has now crossed the important resistance level of 1,420p, the highest point in February this year.
The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are in control. It has also formed a cup-and-handle pattern, a common bullish continuation sign.
Therefore, the stock will likely continue rising as bulls target the key resistance level at 1,532p.
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