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Are Rolls-Royce shares finding momentum following innovative DHL deal?

The Rolls-Royce share price has started to make a recovery this week following a recent deal with DHL. With UK air travel also set to resume later this month, Bank of America’s revised price target has already been surpassed.

  • Rolls-Royce share price up 3.8%.
  • CEO says the worst is over as share surpasses analyst targets.
  • Could DHL deal make up for lost travel earnings?
  • Want to trade Rolls-Royce shares? Open an account today

Rolls Royce shares have suffered as a result of the pandemic. From a peak of 229.92p in February 2020, its share price crashed by 62% to 86.34p in a matter of weeks. The bearish run continued until October 2020, when shares in Rolls-Royce bottomed out at 38.98p. Progress has been slow since then, but recent deal developments could help the Rolls-Royce share price gain momentum.

How much have Rolls-Royce shares jumped this week?

Rolls-Royce shares opened at 104.64p today. That’s up 3.8% from a weekly low of 100.76p. This slight upswing comes at a time when Rolls-Royce is looking towards a more profitable 2022. The return of long-haul flights, a market in which Rolls-Royce engines are crucial, should return towards the end of the year. However, it’s the recent deal with DHL that could help Rolls-Royce shares in the coming months.

The deal announced at the end of April will see DHL take advantage of Rolls-Royce’s TotalCare service. That means Rolls-Royce’s engineers will service the Trent 700 engines used to power the logistics company’s eight Airbus A330 planes. The deal also includes any new Trent 700 engines that are added to the fleet.

A potentially interesting aspect of the deal is that it will be based on a dollar-per-flying-hour model. This makes its overall value hard to determine. However, it should improve efficiency and output for both companies, according to DHL’s Senior Vice President of Global Fleet Management, Geoff Kehr.

‘TotalCare gives us the opportunity to maintain our Trent 700 fleet to best-in-class reliability standards. This frees time and resources so DHL may focus on other fleet maintenance optimisation and operational aspects.’

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What else could help the Rolls-Royce share price?

In addition to a deal with DHL, Rolls-Royce engines will also be used to power the new luxury jet from Dassault Aviation SA. The Falcon 10X will be the company’s largest and fastest private jet, and should be ready in 2025. This is the first time Dassault has used Rolls-Royce as its engine supplier, which could signal the start of a new relationship.

The outlook for Rolls-Royce shares is still uncertain, however, even with the reopening of flight paths in the near future. CEO Warren East said in March that the ‘worst’ was ‘behind’ the company after it posted a £4 billion loss.

Analysts at Bank of America seem to agree. They issued a Rolls-Royce share price target of 80p in March, an increase compared to where it had been previously. This figure has already been surpassed, as has the 97p share price target set by analysts at Deutsch Bank. Rolls-Royce isn’t in the clear, but recent deals may have positive repercussions, and could help to improve cash flow in lieu of long-haul travel returning to normal in 2022.

Will recent deals boost Rolls-Royce shares?

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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