Company Reports

Rolls-Royce's first-half revenue increased by 26% to GBP 11.3 billion and operating profit 46% to GBP 2.5 billion, lifting margin 3.1 percentage points to 22.5%. Management raised 2026 profit guidance to GBP 4.7 billion-GBP 4.9 billion and free cash flow to GBP 3.8 billion-GBP 4.0 billion.

Rolls-Royce reported 2025 operating profit of GBP 3.5 billion, up sharply year on year, with free cash flow of GBP 3.3 billion and a return on capital of 18.9%. The company raised its 2028 midterm targets and announced a GBP 7 billion–GBP 9 billion share buyback.

Rolls-Royce holds a strong position in global commercial and military aerospace propulsion and power systems. Civil aerospace generates approximately 52% of group revenue, and the company is a market leader with around 58% share of the wide-body engine market, supported by sole-source positions on several Airbus platforms.

Rolls-Royce’s trading update confirmed full-year 2025 guidance, with the group targeting underlying operating profit of GBP 3.1 billion-GBP 3.2 billion and free cash flow of GBP 3.0 billion-GBP 3.1 billion.

Rolls-Royce holds a prominent position in the global commercial and military aerospace propulsion and power system sectors. Its commercial aerospace segment generates approximately 50% of group sales, and the company is a market leader with a dominant 58% market share in wide-body aircraft engines.

Group revenue rose 13% to GBP 9.1 billion, led by civil and power. Operating profit rose 50% to GBP 1.7 billion with 19.1% margin—490 bps up, and above the 15–17% midterm target. Outperformance is possible, but guidance held amid macro risks like tariffs and inflation.

Rolls-Royce holds a prominent position in the global commercial and military aerospace propulsion and power system sectors. Its commercial aerospace segment generates approximately 50% of group sales, and the company is a market leader with a dominant 58% market share in wide-body aircraft engines.

Under CEO Tufan Erginbilgic’s leadership, Rolls-Royce has repositioned itself as a financially strong, high-margin, and cash-rich aerospace and defense leader. The reinstatement of the dividend, buyback program, and accelerated transformation reinforce its commitment to long-term value creation. The company has executed well on commercial improvements, cost controls, and strengthening its balance-sheet, making it more resilient to industry shocks. As a result, we have revised our model, particularly for large engines with an updated fair value estimate of GBX 960; this is driven primarily by higher aftermarket margins reflecting improved long-term service agreement profitability.

Rolls-Royce holds a prominent position in the global commercial and military aerospace propulsion and power system sectors. Its commercial aerospace segment generates approximately 50% of group sales, and the company is a market leader with a dominant 58% market share in wide-body aircraft engines.

Despite facing supply chain challenges, narrow-moat Rolls-Royce reported an operating profit of GBP 1.1 billion, reflecting a 74% increase compared with the previous year and an operating margin of 14%, which is 4.4 percentage points higher than the previous year.

Narrow-moat Rolls-Royce delivered another strong set of earnings for 2023, with a record-high group profit margin driven by civil aerospace performance. We are increasing our fair value estimate from GBX 289 to GBX 380 driven by a higher confidence on civil performance delivery.

Rolls-Royce holds a prominent position in the global commercial and military aerospace propulsion and power system sectors. Its commercial aerospace segment generates approximately 50% of group sales, and the company is a market leader with a dominant 58% market share in wide-body aircraft engines.

At its Capital Market Day on Nov. 28, narrow-moat Rolls-Royce presented an in-depth view of its latest strategy and medium-term objectives. Based on the quicker-than-anticipated recovery of wide-body engine flying hours and improved profitability in both the civil aviation and power system sectors, we've increased our fair value estimate for the company from GBX 223 to GBX 289.

Rolls-Royce holds a prominent position in the global commercial and military aerospace propulsion and power system sectors. Its commercial aerospace segment generates approximately 50% of group sales, and the company is a market leader with a dominant 58% market share in wide-body aircraft engines.

Narrow-moat Rolls-Royce upgrades full-year guidance for operating profit and cash flow, on the back of a strong set of results for first-half 2023, with a historical record-high group profit margin driven by civil aerospace performance. Although engine flying hours are still at 80% of 2019 levels, civil aerospace operating margin increased at 12.4% versus a negative 3.4% in first-half 2022 on the back of higher percentage of spare parts sales, cost efficiencies, increased time on wing, and price optimization.

After taking a fresh look at Safran, MTU Aero Engines, and Rolls-Royce, we have confirmed our economic moat ratings but materially increased our fair value estimates to account for a post-COVID-19 air traffic recovery in civil aerospace and pent-up demand in the original equipment segment and aftermarket.

Rolls-Royce holds a prominent position in the global commercial and military aerospace propulsion and power system sectors. Its commercial aerospace segment generates approximately 50% of group sales, and the company is a market leader with a dominant 58% market share in wide-body aircraft engines.

Rolls-Royce entered the coronavirus pandemic in a weak position relative to peers as it was addressing major issues related to its Trent 1000 engine. The group’s civil aerospace segment, which supplies and services engines for the wide-body market, was particularly hard-hit as a result of the drop in demand for new aircraft and a sharp decrease in flight hours for its in service fleet--which is the core driver of group profits. The group responded with a cost-restructuring program, a GBP 2 billion rights issue, and the disposal of assets expected to bring in an additional GBP 2 billion.

Narrow-moat Rolls-Royce reported higher 2022 revenue and operating profit than we forecast. The business benefited from a more favorable operating environment as well as tighter management of contractual terms and pricing. We maintain our GBX 105 fair value estimate. The company is working toward restoring its balance sheet and investment-grade rating. While not making it past that goalpost yet, Rolls-Royce was able to pay back GBP 2 billion in loans in 2022, leading to a net debt reduction to GBP 3.3 billion from GBP 5.2 billion. This debt reduction was possible due to positive free cash flow generation of GBP 505 million and more significantly EUR 1.8 billion in proceeds from the disposal of ITP Aero.

Narrow-moat Rolls-Royce’s trading statement on Nov. 3 did not contain many new insights. Full-year guidance for slight revenue growth, flat margins, and modest free cash flow was maintained. The group finalized its disposal of ITP Aero and used the proceeds to repay GBP 2 billion of loans—this goes some way to restore the balance sheet, but a lot of work still needs to be done to restore its investment-grade credit rating. Cost inflation will be somewhat offset by price escalation clauses, while supply chain disruptions will result in higher inventory levels. Rolls-Royce is trying to sell the long-term story of growth in its new markets segment, which includes electric planes and small modular nuclear reactors. Although we believe Rolls-Royce has the capabilities to invest in these growing markets, they are far from being commercially viable and the medium-term prospects of the group will rest on the performance and recovery of the civil aerospace segment.