Rolls-Royce has been outperformed by Palantir, Nvidia but few others - and the gains continue

MW Rolls-Royce has been outperformed by Palantir, Nvidia but few others - and the gains continue

By Steve Goldstein

Rolls-Royce beats earnings estimates and offers ambitious guidance

Rolls-Royce, the engine maker that's been one of the hottest stocks in Europe over the last two years, extended its winning ways on Thursday after beating analyst expectations and setting medium term guidance that points to continued growth.

Rolls-Royce shares (UK:RR) surged 15% in London to a new record high.

The stock over the last two years has compounded at an annual rate of 124%, according to FactSet data - a figure beaten by Palantir and Nvidia but few other companies.

Rolls-Royce said its pretax profit last year surged to GBP2.29 billion from GBP1.26 billion while revenue rose 16% to GBP17.85 billion.

Analysts expected a pretax profit of GBP2.03 billion on revenue of GBP17.28 billion, according to Visible Alpha.

The company's been growing on demand for aircraft engines, submarines and nuclear reactors. The civil aerospace business saw organic sales growth of 24% last year - engine deliveries rose 16% as flying hours rose 14% - while defense and power systems also enjoyed double-digit growth.

It also updated mid-term targets, seeing underlying operating profits growing to between GBP3.6 billion and GBP3.9 billion in 2028 on free cash flow between GBP4.2 billion and GBP4.5 billion. Analysts had estimated an GBP3.6 billion operating profit in 2028 on free cash flow of GBP3.6 billion.

Rolls-Royce said it expects strong growth beyond the mid-term, saying it can outgrow the market for both widebody and business aviation, that defense will be boosted by new platforms such as the nuclear submarines being produced for Australia, the U.K. and the U.S., as well as power systems growth from data centers.

-Steve Goldstein

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February 27, 2025 05:00 ET (10:00 GMT)

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