Rolls-Royce share price has remained under pressure in the past few weeks as the recent bull run stalled. RR was trading at 1,135p on Wednesday, a few points below the year-to-date high of 1,192p. This article explores what to expect after the GE Aerospace earnings.
Rolls-Royce stock analysis after GE Aerospace earnings
RR share price rose slightly after GE Aerospace, its biggest competitor, published strong results that demonstrated resilient deman in the airline industry.
GE Aerospace said that its total revenue jumped by 24% last quarter to $12.2 billion as its order book rose by 2%. Its profit margin rose by 150 basis points to 20.57%, while cash from operating activities rose to $2.6 billion.
GE’s management also boosted its forward guidance as it expects the industry to keep growing in the coming year. It now expects that the revenue growth will be in the high-teens. It also expects that its operating profit will be between $8.65 billion and $8.85 billion.
These numbers are notable for Rolls-Royce because, like GE Aerospace, the two are in the same industry. Rolls-Royce makes over 50% of its revenue in the civil aviation industry, where it manufactures wide-body engines. It then makes most of its money in long-term servicing contracts by these airlines.
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Therefore, there is a possibility that Rolls-Royce Holdings also received substantial orders during the quarter. The most recent results showed that the company’s revenue rose by 13% in the first half of the year to £9.05 billion.
Its efforts to reduce costs and boost efficiency helped it boost it gross and operating profits in the year’s first half. It jumped by 33% to £2.5 billion, while the operating profit rose by 50% to £1.73 billion.
The civil aviation business helped to lead this business, with its revenue rising by 17% to £4.78 billion. Its gross profit rose to £1.47 billion, while the operating profit was £1.19 billion.
Rolls-Royce’s defence and power systems business also did well in the year’s first half. Defence revenue rose by 1% to over £2.2 billion, while the power system business rose by 20% to £2.04 billion.
Analysts believe that the company has more upside in the coming months. Berenberg analysts upgraded the stock from sell to hold nd boosted the estimate to 1,080p.
Rolls-Royce share price technical analysis
The daily chart shows that the RR stock price has been in a bull run in the past few months. It moved to a high of 1,192p in September and then pulled back to the current 1,138p.
The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA). It has formed a bullish flag pattern, and is sitting at the strong pivot reverse of the Murrey Math Lines.
Therefore, the Rolls-Royce share price will likely continue rising as bulls target the key resistance level at 1,192p. A move above that level will point to more gains, potentially to the ultimate resistance level at 1,250p. It will then jump to the extreme resistance at 1,375p.
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