Rolls-Royce share price forecast: third- party price target

As of January 2025, Aerospace giant Rolls-Royce (RR) has secured a significant £9 billion ($11 billion) contract with the UK Ministry of Defence to design, manufacture, and provide support services for nuclear reactors powering the Royal Navy's submarine fleet. This eight-year "Unity" contract aims to enhance the UK's continuous at-sea deterrent and supports the AUKUS defence pact between the UK, the United States, and Australia. The investment is expected to create 1,000 new jobs and safeguard 4,000 existing positions, bolstering both national security and the economy.

Past performance is not a reliable indicator of future results

In this Rolls-Royce share price forecast we look at the recent history, where it’s focusing attention, and what analysts predict.

What is Rolls-Royce Holdings?

Rolls-Royce Holdings, which trades on the London Stock Exchange (LSE) under the RR ticker, operates in three core business segments: civil aerospace, power systems, and defence.

The civil aerospace division builds aircraft engines, power systems provides power solutions to multiple end markets, and defence is involved in the military.

It’s important not to get the company confused with Rolls-Royce motor cars, which is now a totally separate entity owned by BMW. While both businesses can trace their roots back to 1884, when Henry Royce established an electrical and mechanical business, they have been on different paths since the early 1970s.

What is now known as Rolls-Royce Holdings had been nationalised following bankruptcy but was privatised by the British government in 1987.

Rolls-Royce share price prediction

As of January 2025, Rolls-Royce Holdings plc (LSE: RR.) is trading at approximately £6.20 per share. Analyst forecasts for the company's share price over the next 12 months vary:

• Investors Chronicle reports a median target of 635p, with estimates ranging from a low of 450p to a high of 850p, based on assessments from 16 analysts.
• Yahoo Finance UK notes a consensus price target of 609p, which is about 5% above the current level.
• Investing.com indicates a slightly lower average short-term price target of 603p, with a high of 850p and a low of 240p.

These forecasts reflect varying levels of optimism among analysts regarding Rolls-Royce's future performance. It's important to consider that such predictions are uncertain and should be evaluated alongside broader market conditions and company-specific developments.

This RR share price forecast doesn’t constitute investment advice. It’s important to remember that analysts’ and algorithm-based Rolls-Royce share price predictions can be wrong.

You must always carry out your own due diligence before trading, looking at the latest news, a wide range of commentary, and technical and fundamental analysis. Remember that past performance is no guarantee of future returns so you should never invest money you can’t afford to lose.

Rolls-Royce share price drivers

1. Defense Sector Strength

Rolls-Royce has secured a record £9 billion ($11 billion) contract with the UK Ministry of Defence for nuclear reactors for the Royal Navy's submarine fleet. This deal supports the UK's continuous at-sea deterrent and the AUKUS pact, solidifying Rolls-Royce's position in defence. The contract is expected to create over 1,000 new jobs and safeguard 4,000 existing ones. This will likely boost investor confidence and strengthen long-term revenue prospects in a stable sector.

2. Recovery in Civil Aerospace

The company's civil aerospace division continues to recover post-COVID, with an increase in flying hours for wide-body aircraft engines. The continuation of the global travel rebound in 2025 supports the demand for aircraft engines and services. This will likely improve cash flow and revenue growth from maintenance and new orders.

3. Commitment to Sustainability

Rolls-Royce is pioneering sustainable aviation technologies, including its involvement in the first net-zero transatlantic flight with Virgin Atlantic. This aligns with the growing demand for decarbonized travel and government-backed sustainability initiatives, which positions Rolls-Royce as a leader in green aviation, attracting ESG-focused investors.

4. Cost Restructuring and Efficiency Programs

The company has undergone significant cost-cutting measures, disposing of assets worth over £2 billion and restructuring operations to improve margins. The appointment of CEO Tufan Erginbilgic has emphasised disciplined financial management and operational efficiency, which could enhance profitability and operational resilience.

5. Global Economic and Geopolitical Trends

Inflation and supply chain constraints persist but have been partly mitigated by operational improvements. Rolls-Royce benefits from defence spending increases due to heightened geopolitical tensions, especially in Europe and the Indo-Pacific, which offsets broader economic uncertainties.

However, there are some risks to consider. Ongoing supply chain pressures and geopolitical instability could hinder performance. Weakness in emerging markets or a slow recovery in air travel would weigh on the civil aerospace segment, and rising financing costs due to higher interest rates might impact profitability.

Overall, Rolls-Royce’s share price will likely depend on its ability to sustain growth in defence and aerospace, coupled with a clear commitment to innovation and efficiency.

How has RR price performed?

Past performance is not a reliable indicator of future results

Over the past five years, Rolls-Royce Holdings plc has experienced significant fluctuations in its share price, influenced by various internal and external factors.

2019-2020: Pre-Pandemic Stability and Initial Impact

In 2019, Rolls-Royce's share price remained relatively stable, trading between £2.45 and £3.70. However, the onset of the COVID-19 pandemic in early 2020 severely impacted the aviation industry, leading to a sharp decline in the company's share price. By October 2020, the stock had plummeted to around £0.37, necessitating a rescue rights issue to bolster the company's finances.

2021-2022: Gradual Recovery Amid Challenges

Throughout 2021 and 2022, the share price showed a gradual recovery, fluctuating between £1 and £1.60. This period was marked by ongoing challenges, including supply chain disruptions and varying levels of air travel demand due to pandemic-related restrictions.

2023-2024: Significant Turnaround and Growth

Under the leadership of CEO Tufan Erginbilgiç, appointed in January 2023, Rolls-Royce implemented strategic initiatives focusing on cost reduction and operational efficiency. These efforts, coupled with a resurgence in air travel, led to a substantial increase in the share price. By mid-2024, the stock had risen to approximately £4.80, reflecting renewed investor confidence.

2025: Continued Momentum

As of January 2025, Rolls-Royce's share price has continued its upward trajectory, reaching £6.25. This growth is attributed to ongoing improvements in financial performance, successful restructuring efforts, and significant contracts in the defence sector. Overall, the past five years have been a period of volatility for Rolls-Royce, characterized by a sharp decline during the pandemic, followed by a strategic turnaround leading to substantial recovery and growth in the share price.

Rolls Royce reports increasing profits

Rolls-Royce Holdings plc's most recent earnings report was released on August 1, 2024, covering the first half of 2024. The company reported an underlying operating profit of £1.2 billion, a significant increase from £673 million in the same period the previous year. This improvement was attributed to increased demand in the civil aerospace and power systems divisions and ongoing cost-reduction initiatives.

In November 2024, Rolls-Royce reaffirmed its financial guidance for the year, citing strong demand in the aerospace and defence sectors. The company also highlighted progress in its transformation plan to achieve substantial cost savings and improve profitability.

The next earnings report, detailing the full-year results for 2024, is scheduled for February 27, 2025. Analysts anticipate an underlying operating profit between £2.1 billion and £2.3 billion for the full year, reflecting continued growth despite challenges in the aerospace supply chain.

Rolls-Royce trading strategies to consider

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