FY earnings due for aerospace giant

2026-02-25 06:43:44

This report is taken from this week’s CNBC UK Stock Exchange newsletter. Like what you see? You can subscribe here.

Mission

Employees work on a Rolls-Royce Trent 7000 engine for an Airbus SE A330neo at Safran SA’s plant in Colomiers, France, Tuesday, March 25, 2025. Safran Nacelles manufactures short-, medium- and long-haul commercial aircraft. Photographer: Matthieu Rundel/Bloomberg via Getty Images

Bloomberg | Bloomberg | Getty Images

What would you do if you were the CEO of a company whose stock price has risen more than 1,200% since you took the job?

If you are Tuvan Erginbilgic, CEO of… Rolls RoyceYou declare your ambition to become the largest company on the London Stock Exchange.

To put that in context, it even modestly surpasses the current No. 1 AstraZenecaErginbilgic, the former BP executive, would need to add another £124bn ($167.34bn) or so to Rolls’ market capitalization – an increase of about 110% from here.

Investors will get a reasonable idea of the progress being made toward that goal when the manufacturer of aero engines and power systems posts full-year results later this week.

Rolls itself raised guidance for 2025 when, in its interim results last July, it pointed the market towards full-year underlying operating profits of between £3.1bn and £3.2bn, up from the previous range of £2.7bn to £2.9bn. Since then, in a trading update in November, it said performance across the group was in line with expectations.

Yet this is a company — kept alive during the pandemic by Erginbilgic’s underappreciated predecessor, Warren East — for which analysts and investors alike are now accustomed to seeing forecasts beating expectations. Rawls consensus forecast Goes ahead of current guidance.

As Partners’ Nick Cunningham and Sash Tusa, two of the most experienced analysts tracking Rolls, put it in a note to clients last Friday: “Rolls-Royce raised guidance with… results last August and reiterated that guidance in its trading statement… so it would be surprising if it did anything other than slightly beat its guidance.”

The latest update indicates that all three legs of Rolls – civil aerospace, defense systems and energy – are enjoying strong growth.

In civil aviation, the company’s most popular division, orders for large new engines continue to arrive – from IndiGo, Malaysia Airlines and Avolon are tagged In November – while big engine flight hours (Rolls’ Power-by-the-Hour engine maintenance program sees it pay a flat rate for every hour its engines are in the air) last year surpassed pre-pandemic levels and continue to grow.

In defence, demand is also healthy, supported by governments everywhere ramping up spending in response to growing security threats. It was perhaps no coincidence that Rolls shares rose to all-time highs last week, hours after it was announced that… The UK government may seek to meet its target of spending 3% of GDP on defence Before the date set for the end of the next parliamentary session.

In energy systems, Rolls is participating in the artificial intelligence revolution, as data centers globally rely on their own power generation systems. The company is also helping to support grid resilience as governments seek to reduce carbon emissions from power grids: in October last year, it launched a new modular solution for gas-engined power plants aimed at improving security of supply in Germany. These plants are available as backup plants during periods — the Germans call them “dunkelflaute” or “dark doldrums” — when wind and solar generation declines due to gloomy weather.

All three sections should continue to enjoy tailwinds. In civil aviation, for example, Rolls is benefiting as manufacturers Airbus and Boeing struggle to deliver new planes at the pace the market demands – forcing airlines to keep using older planes (and their engines) for longer.

Nuclear excitation

In terms of future growth, perhaps the most current excitement surrounds the company’s work in nuclear energy.

A Rolls-led consortium, which also includes Czech utility group CEZ, was selected by the UK government in June last year – after a two-year competition that saw competition from Westinghouse, Holtec and GE Hitachi – to build three plants powered by small modular reactors (SMRs).

The technology, based on Rolls’ work providing the power plants that propel the Royal Navy’s nuclear submarine fleet, has also been selected for use by the Czech government and has reached the final stage of Sweden’s process to select a nuclear technology partner.

While Rolls-Royce’s SMR business is currently capital intensive, Erginbilgic said last August that he expected it to be profitable and free cash flow positive by 2030, adding: “We have unique capabilities in nuclear power… and a very advantageous position in a growing market.”

“Therefore, we expect the value of this business to grow significantly from now.”

This may not be the only extension of existing capabilities. The worst decision made by Rolls management in recent times was the 2011 decision to stop making engines for narrow-body or so-called “single-aisle” aircraft – only for the category to see explosive growth as short-haul, low-cost air travel expands rapidly around the world.

Erginbilgic confirmed at the Paris Air Show last year that he would like Rolls to return to the market, but indicated that it might do so through a partnership.

Therefore, investors will seek more details on this and on the progress being made towards obtaining taxpayer subsidies to support the development.

Some aviation industry executives, including Wizz Air CEO Joseph Varadi, have indicated they would prefer Rolls to go it alone.

Others simply want Rawls back.

“There are only two suppliers in the world for short-haul engines at the moment – GE Safran and Pratt & Whitney. Whitney is struggling to repair the engines it already makes,” Michael O’Leary, Ryanair’s chief executive, said last month.

“We need someone like Rolls-Royce to get back into this market.”

All of this means that these are exciting times for one of Britain’s most storied major companies.

The problem for potential new investors is that much of this has already been priced into the share price. Cunningham and Tusa point out that in 2028, when the price-to-earnings multiple is 36 times and the enterprise value-to-sales multiple is 4.6 times, the stock price may be “overshooting.”

Others might argue that, given Rawls’s near-death experience during the pandemic, this is not such a bad problem.

— Ian King

Top TV picks on CNBC

James Crouch, Head of Policy Research and Public Affairs at Opinium, discusses this week’s crucial by-election for UK Prime Minister Keir Starmer.

Tina Fordham says Trump's new tariffs punish close allies

Tina Fordham, founder of Fordham Global Foresight, discusses President Donald Trump’s latest tariffs and what they mean for trading partners and exporters.

UK inflation is at its lowest levels in almost a year, and the Bank of England cut back on play in March

UK inflation fell to 3% at the start of the year, but a stronger-than-expected services inflation reading raises questions for the Bank of England ahead of its meeting next month.

– Holly Eliatt

Need to know

British businesses seek deeper ties with Europe as Trump’s tariffs fuel uncertainty. Trump’s swing is forcing British businesses to look to closer alignment with the EU and European countries. While they look for predictable business partnerships.

‘Don’t give up on Diego Garcia’: Trump attacks UK over Chagos Islands deal again. The president suggested Chagos deal This was motivated by “Wokeism” after the UK came under pressure to return the islands to Mauritius.

Tesla’s problem in Europe continues to get worse. This is why. US electric car maker TeslaThe company’s sales were in Europe For the 13th month in a row In January, while the biggest Chinese competitor saw another rise.

– Holly Eliatt