RE: Upgrade3 Mar 2025 08:14
BofA Global Research on Feb. 28 increased Rolls-Royce Holdings' (RR.L) price target, citing the British aerospace and defense company's updated mid-term outlook and the earlier-than-expected launch of a 1 billion-pound-sterling share buyback.
Keeping the stock's rating at buy, the analysts raised the price target to 11.5 pounds from 8.3 pounds, reflecting a 57.2% upside. BofA also increased its EPS estimates for 2025 and 2026 to 0.2574 pound and 0.3192 pound, respectively, from 0.2226 pound and 0.2934 pound.
The changes are supported by Rolls-Royce's guidance for 4.2 billion pounds to 4.5 billion pounds of free cash flow in 2028, driven by the persistent growth in long-term service agreements balance and a significant improvement in the "time on wing" performance. The repurchase program further highlights the group's confidence in its cash generation, BofA said.
"Rolls LTSA balance will grow at the upper end of the range in 2028 and given the Trent 700 LTSA balance is still growing, we think the overall balance grows through the end of the decade. Rolls is leveraging pricing strongly with customers, and they highlight they don't expect to benefit from 100% of this through the P&L/cash flow until 2035," analysts wrote.