Stock of the Week: Rolls-Royce

VIDEO: Shares have had an amazing run this year amid the travel boom

James Gard 2 August, 2023 | 9:11AM
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James Gard: So earnings season has given us a new surprises, but the biggest in terms of the share price impact has been Rolls-Royce. The company makes and maintains engines for passenger jets and military planes. So in an era of booming travel and ongoing war in Europe, this is a good business to be in. And its long and painfaul restructuring finally appears to be paying off. Ahead of its half-year results on August 3rd, Rolls Royce made big upgrades to its forecasts for operating profit and cash flow. The share price jumped 20% on the day and it’s up more than 90% this year so far.

Things haven’t always been so promising. I last looked at Rolls Royce in February 2022. At that point shares were falling because the chief executive had quit and there were doubts over the recovery in travel. The company had just tapped investors for cash. More than a year on, the outlook appears to have change dramatically in the company’s favour.

A new chief executive who started in January this year continued to shake up Rolls Royce and cut costs. In terms of Morningstar metrics, Rolls has a narrow economic moat because of its expertise in civil aereospace. But shares are now in overvalued territory after recent gains. The company hasn’t paid a dividend since the pandemic but that may change next year. Also travel demand is always hard to predict especially after the pandemic and as climate change disrupts the traditional holiday season. After soaring temperatures in southern Europe, many travellers to rethink their summer beach plans. For Morningstar, I’m James Gard.

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James Gard

James Gard  is senior editor for


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