Rolls-Royce shares soar as it upgrades earnings forecasts

It says that significantly improved first half results will show underlying operating profit of £660m-£680m (consensus: £328m) and free cash flow of £340m-£360m (consensus: £50m). Full-year guidance was also raised: it now expects underlying operating profit of £1.2bn-£1.4bn (consensus: £934m) and free cash flow of £0.9bn-£1.0bn (consensus: £732m) in 2023, helped by ‘early transformation benefits’.

(Video Transcript)

Rolls-Royce

There's been a positive news headline this morning coming through from the aero engine maker Rolls Royce. It's given us a warning that it is going to post better than expected earnings for the first half of the year and also for the full year. Results are expected to be materially above previous consensus. That's the wording from Rolls-Royce this morning.

Share price chart

Let's take a look at the share price chart. I want to look at the context and the big declines that we've seen during the time when it had troubles from the highs we had back in August 2018 at £11 a share. Since then, down to the low point, we've seen 94% down. massive value destruction. But look at the recovery that we've seen since the lows that we had back in September last year.

There is now a new chief executive who has already stepped down and then came through with the intention of having a new strategy at the company. That was the first leg higher on the share price back in February this year. And since then, we've seen this move up, and we've got shares now trading at levels they've not seen since October 2020.

Rolls-Royce earnings

Let me take a look at this rise that we've got today. It's currently up 20.4%. The significantly improved first half results are expected to come through between 660 million and £680 million. And we've been looking for 328 million in full-year guidance. Also raised the margin improvements led by civil and defense, and the company is getting some big news headlines coming through as well, not just for its aero engine sales but also for the servicing contracts as more people start to fly.

It means that more airlines are in the air, so they need more servicing contracts extended. So, on 85.1 pence at the moment, that shares at the moment are up 20.4% on the trading day after that news that the company is expecting better earnings ahead.

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