Rolls-Royce (RR) stock falls on renewed uncertainty
By Neil Dennis
09:29, 9 December 2021
Rolls-Royce (RR) shares fell on Thursday as a broadly positive trading update was overshadowed by continued uncertainty surrounding the travel sector in the face of persistent coronavirus concerns
Shares in the British aero-engine maker fell 3.2% to 124.7p (164.7¢) in early trade on the London Stock Exchange.
Cost savings
The FTSE 100-listed engineering company reported large cost savings from its restructuring programme, improving order intake as the airline industry began to recover, and – as a result – a bumper free cash flow that is “expected to be better than previous guidance of £2bn”.
The fall in share price may suggest investor disappointment that a £2bn windfall from its disposals programme will be used to pay down debt and strengthen the balance sheet rather than being distributed among shareholders.
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External uncertainties
Warren East, chief executive, welcomed the “gradual recovery” in Rolls-Royce’s civil aerospace business but also acknowledged that external uncertainties remained.
AJ Bell analyst Danni Hewson told Capital.com: “The outlook for the travel sector, in the context of Covid, looks very uncertain, and any company connected with that industry faces the same uncertainty.”
The performance of its civil aerospace division was the main blot on the trading statement. Installed engine sales and aftermarket activity were both lower than in the previous year, and at the lower end of guidance given at the half-year stage, the company said.
Chris Beauchamp, chief market analyst at IG, said: "The cheery tone of Rolls-Royce’s update this morning has not been matched by the shares, which remain under pressure, having lost 16% over the past month versus a flat performance for the FTSE 100."
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