Can Rolls Royce Shares Fly?

Rolls-Royce has enjoyed stupendous success in civil aviation, but it faces strong competition. Can it perform for investors?

Daniel Holland 24 September, 2013 | 3:28PM

Rolls-Royce ( RR.) is one of only four firms in the world that can successfully develop and manufacture commercial narrow-body jet engines, a key reason we think the company stands to benefit from sizable competitive advantages in its end markets. That said, we see a few growth headwinds for Rolls-Royce--defense spending is coming under pressure globally and the company lacks a presence in the next generation of commercial narrow-body aircraft.

Alliances and joint ventures abound in the commercial aerospace engine market, where a partner on one platform may be a competitor on another. Each firm is fully aware of the others' technologies. Competition, though fierce, provides an adequate return for firms investing in new platforms. Rolls-Royce's Trent engines have carved positions on a number of major commercial airframes, including the Boeing 787 and Airbus' A380 and A350 platforms. Each of these platforms should produce steady demand for Rolls-Royce in the coming years.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Rolls-Royce Holdings PLC258.20 GBX-3.58

About Author

Daniel Holland  Daniel Holland is a stock analyst with Morningstar.

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