8th November 2013
Stockbrokers are labeling Rolls-Royce a ‘buy’ on the back of the engineering giant’s latest interim management statement writes Philip Scott.
In a report issued today by the aero-engine maker, which has seen its stock rise by 36% over the past 12 months, it announced it is still trading in-line with management expectations while its order book has grown rapidly, and now stands close to £70bn.
Jonathan Jackson, head of equities, Killik & Co says, says: “This provides excellent visibility over future revenue, a valuable asset in today’s uncertain times. Although there is some risk of deferral/cancellation, the economics of replacement – new planes are 20% more efficient – mean airlines have little choice but to invest.
“In addition, orders from financially-strong emerging market airlines should be more resilient, as they are needed to meet the demand from the increased passenger volumes which are being driven by rising middle class spending power.”
Helal Miah, investment research analyst at The Share Centre, says: “Investors will welcome the Japan Airlines order of 31 Airbus aircraft which will use the company’s Trent XWB engines.
“Rolls Royce has won multiple contracts in the troubled Defence Aerospace sector with the US government worth of $600m and expectations for the division have now been upped from broadly flat to modest growth. However, management have downgraded their expectations for the smaller Marine division and now expect no growth for the full year.”
Following a recent re-structure, cash inflow and long term service contracts growth looks set to improve at the supplier of power generating turbines to the marine and energy market. As such Miah recommends Rolls Royce as a ‘buy’ for long-term investors seeking a medium level of risk. He adds: “However, with the share price once again nearing all-time highs, investors would be advised to drip feed into the stock.”
Jackson says: “We remain positive on the shares, which provide exposure to the theme of growing air travel.”