On Thursday, Goldman Sachs adjusted its price target on Rolls-Royce Holdings Plc (LSE:LON:RR) (OTC: RYCEY) shares to GBP5.45, up from the previous GBP5.24, while reiterating a Conviction Buy rating on the stock. The firm's analyst cited optimism for a robust first half of the fiscal year 2024, following a recent trading update from the company.
The update from Rolls-Royce (OTC:RYCEY), which prompted the revised price target, included improvements in contractual terms expected to contribute approximately GBP100 million in the first half of the year.
Additionally, adjustments were made to account for foreign exchange rates. Goldman Sachs now anticipates an operating profit of GBP1,039 million and free cash flow (FCF) of GBP901 million for the first half of 2024.
For the full fiscal year, Goldman Sachs' estimates for Rolls-Royce's operating profit and free cash flow have been set at GBP2.3 billion and GBP2.4 billion, respectively. These figures surpass the consensus data from Visible Alpha, which stands at GBP2.0 billion for both operating profit and FCF, and also exceed the company's own guidance of GBP1.7 to 2.0 billion for operating profit and GBP1.7 to 1.9 billion for FCF.
The analyst's comments reflect a fine-tuning of estimates in light of the recent developments conveyed by Rolls-Royce. The company's performance in the first half of the fiscal year appears to be a key factor in maintaining the Conviction Buy rating and the increased price target.
In other recent news, Rolls-Royce Holdings Plc has been the subject of notable revisions by Bernstein, a research firm. The firm has upgraded Rolls-Royce's price target to £5.00, up from the previous £5.00, while maintaining a Market Perform rating.
This adjustment reflects an optimistic outlook on Rolls-Royce's prospects, with the potential for positive outcomes being acknowledged. The firm suggests that for a more favorable view on Rolls-Royce's stock, continuous positive revisions to forecasts are necessary, along with clarity on the potential to exceed targets set during the company's Capital Markets Day.
Despite these recent developments, Bernstein maintains that the risks and rewards for Rolls-Royce are well-balanced, given the high market expectations. The Market Perform rating implies that Bernstein expects Rolls-Royce's performance to align with the broader market indices or the sector average.
InvestingPro Insights
Rolls-Royce Holdings Plc (RYCEY) has been a topic of interest for investors, with Goldman Sachs expressing a strong positive stance on the company. Complementing this outlook, InvestingPro Tips highlight that Rolls-Royce is not only a prominent player in the Aerospace & Defense industry but also that analysts predict the company will be profitable this year. Additionally, the company has been trading near its 52-week high and has experienced a large price uptick over the last six months, indicating strong market confidence.
Key metrics from InvestingPro Data reinforce this sentiment, showing a robust revenue growth of 21.94% over the last twelve months as of Q4 2023, and an impressive EBITDA growth of 85.16% in the same period. The market cap stands at a significant $50.24B, while the company maintains a moderate level of debt. Furthermore, the stock has delivered a strong return of 203.32% over the past year, which aligns with the analyst's conviction in the stock's potential.
For readers looking to delve deeper, InvestingPro provides additional insights and metrics on Rolls-Royce, with a total of 10 more tips available on their platform. These can be accessed by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Such data could prove invaluable for those considering an investment in the company or seeking to understand the driving forces behind its recent performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.