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Rolls-Royce Holdings PLC ADR RYCEY Stock Quote

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Morningstar‘s Stock Analysis RYCEY

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Rolls-Royce Maintains Guidance; FVE Unchanged

Joachim Kotze, CFA Equity Analyst

Analyst Note

| Joachim Kotze, CFA |

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.

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Key Statistics RYCEY

Company Profile RYCEY

Business Description

Rolls-Royce operates three core business segments: civil aerospace, power systems, and defense. The civil aerospace segment builds engines powering wide-body aircraft, regional and business jets, and offers aftermarket services. Twenty years ago, the firm pioneered full-service flight hour contracts with the TotalCare package. Power systems provides power solutions to multiple end markets (defense, agriculture, marine, and power generation) while the defense business provides military, ground vehicle and naval propulsion solutions.

90 York Way, Kings Place
London, N1 9FX, United Kingdom
T +44 2072229020
Industry Aerospace & Defense
Most Recent Earnings
Fiscal Year End Dec 31, 2022
Employees 40,000