Analysts at Bank of America have predicted that shares in engineering behemoth Rolls-Royce could surge by an additional 50% following an already impressive two-year rally.
On Friday, analyst Benjamin Heelan raised his price target from 830p to 1,150p, as reported by Bloomberg, which led to a mid-day share price increase of over three per cent, as reported by City AM.
This news arrived just one day after the London-listed company reinstated dividend payouts for the first time since the pandemic and announced a £1bn share buyback scheme.
The appointment of CEO Tufan Erginbilgic in January 2023 marked the start of a remarkable recovery for a company that was on the brink of bankruptcy during the Covid-19 crisis.
A combination of soaring travel demand and escalating military expenditure worldwide has generated significant demand for Rolls’ jet engines and defence technology.
Heelan noted that the firm had reaped the benefits of robust deliveries, pricing, and an enhancement in the reliability of its engines.
Travel demand has remained strong over the past year, with numerous airlines, including British Airways owner IAG, reporting record profits.
On Tuesday, Prime Minister Sir Keir Starmer announced the largest increase in defence spending since the Cold War.
From April 2027, it is set to rise to 2.5% of GDP, with a goal to reach 3% by the end of the parliament.
Rolls-Royce is targeting profits of between £3.6bn and £3.9bn by 2028 and free cash flow of between £4.2bn and £4.5bn.
Over the last 12 months, shares have risen by more than 100%.
“We are moving with pace and intensity,” Erginbilgic stated on Thursday. “Based on our 2025 guidance, we now expect to deliver underlying operating profit and free cash flow within the target ranges set at our Capital Markets Day, two years earlier than planned.”