Rolls Royce £1bn Share Buy-back

Rolls Royce announced a £1 billion share repurchase plan on Thursday, to distribute its accumulated cash to shareholders

Daniel Holland 20 June, 2014 | 9:26AM
Facebook Twitter LinkedIn

Rolls Royce (RR.) announced a £1 billion share repurchase plan on Thursday, to distribute its accumulated cash to shareholders. With the current share price below our fair value estimate, we view this corporate purchase as a reasonable use of capital.

That said, our current fair value estimate assumes £800 million of share repurchases over the next two years, so the incremental benefit to our valuation is not enough to merit changing our current fair value estimate of £11.15. Our narrow economic moat rating is unchanged following this announcement.

Rolls-Royce 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 defence spending is coming under pressure globally and the company lacks a presence in the next generation of commercial narrow-body aircraft.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rolls-Royce Holdings PLC125.44 GBP0.00Rating

About Author

Daniel Holland  Daniel Holland is a stock analyst with Morningstar.