Rolls-Royce share price forecast: Can new CEO and cost-reduction programme revive RR stock?
Aerospace giant Rolls-Royce (RR) is focused on the future after battling to recover from the damaging effects of the Covid-19 pandemic. The company, which makes aircraft engines and power solutions, has seen its share price plummet almost 56% over the past three years.
But there are hopes of a brighter 2023 in the wake of a cost reduction programme and the appointment of a new chief executive. Since October 2022 the RR share price recovered some losses, bouncing back over 50%.
Rolls-Royce (RR) live stock price
In this Rolls-Royce share price forecast we look at what’s happened to the company over the past five years, 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.
As of January 2023, it had customers in more than 150 countries, including more than 400 airlines and leasing customers, 160 armed forces and navies, and more than 5,000 in power and nuclear power.
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.
How has RR price performed?
So, how has the RR share price performed? Well, over the past five years it’s fallen 65%, from 295.40p to 103.76 at market close on 9 January 2023. It’s down 18.72% over the past year.
In a research note, Joachim Kotze, an equity analyst at Morningstar, said Rolls-Royce was already in a weak position due to issues with its Trent 1000 engine – and then the coronavirus pandemic hit. He wrote:
Kotze pointed out that the group responded with a cost-restructuring program, a £2bn rights issue, and the disposal of assets expected to bring in an additional £2bn.
However, the stock has done better more recently with a 19.6% increase having been recorded over the past six months, and rising over 50% since October 2022.
Since the beginning of this year, the RR share price has increased 5.8p from 98p. Optimism has been helped by factors such as improving sentiment among some analysts. For example, Jefferies recently raised the stock from a ‘hold’ to a ‘buy’ and lifted its price target from 90p to 125p a share.
Rolls Royce reports losses
Any Rolls-Royce share price prediction needs to consider the most recent earnings, with the company having issued half-year results in early August 2022.
Although it recorded an underlying profit of £5.3bn – up on the £5.2bn for the corresponding period in 2021 – it actually made a loss of £111m. This was partly due to increased financing costs.
In a statement, it highlighted a “challenging” external environment, with the Ukraine war, inflationary pressures and supply chain constraints all impacting the business.
“We are working across the group to increase the productivity and efficiency of our operations and improve commercial discipline to drive a better and more balanced financial performance,” it stated.
In a subsequent trading update issued in early November 2022, the company said there had been a “continued recovery” and that group full year 2022 guidance remained unchanged. The then chief executive, Warren East, said:
New chief executive at the helm
Tufan Erginbilgic took over as chief executive in July 2022, succeeding Warren East who announced last February his intention to step down from the role.
Erginbilgic, who has an engineering background and spent more than 20 years with oil giant BP (BP), said he was honoured to be joining at a time of significant commercial opportunity. He said:
When the announcement was first made in July 2022, Victoria Scholar, head of investment at interactive investor, acknowledged the company had endured a tough period, noting:
First net-zero transatlantic flight
Another development that could help the RR share price is the world’s first net-zero transatlantic flight being due to take off this year after Virgin Atlantic received government funding to fly using solely sustainable aviation fuel (SAF).
One of its flagship Boeing 787s, powered by Rolls-Royce Trent 1000 engines, will take off from London Heathrow for the journey to New York’s John F Kennedy Airport.
The flight is expected to be fuelled by SAF made primarily from waste oils and fats, such as used cooking oil.
Mark Harper, Transport Secretary, Department for Transport, said London to New York will be at the forefront of decarbonising flying.
“Not only will this flight pave the way for future generations, but it will demonstrate just how much we can achieve when we work together on a shared goal,” he said.
Rolls-Royce share price forecast: What do the analysts expect?
So, what are the Rolls-Royce stock forecasts of industry observers? The stock was a ‘hold’, based on the RR share price forecast views of 10 Wall Street analysts, compiled by TipRanks as of 10 January. However, opinions were divided with four rating it a ‘buy’, four a ‘hold’, and the remaining two a ‘sell’.
Their consensus Rolls-Royce share price forecast for 2023 is was for the stock to rise modestly by 1% over the coming year to 104.84p from its 103.76p closing price on 9 January 2023. The highest Rolls-Royce share price forecast came in at 146.74p, while the lowest suggested a fall to 74.87p.
According to the algorithmic forecasts of WalletInvestor at the time of writing, RR stock was a “bad long-term investment” that was predicted to fall 14% to 89.41p.
The site’s Rolls-Royce share price forecast for 2025 saw the stock tumbling to 73p by January 2025 and to 61p by the end of that year.
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, 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.