Aero-engine maker Rolls‑Royce (RR.) set a new all-time share price high after reporting a sharp rise in annual profit, lifted medium‑term financial targets, and promised an upto £9 billion share buyback as its remarkable recovery continues. Leading the way was strong aero‑engine demand, efficiency gains and mega cashflows saw the stock rally more than 5% on Thursday, setting a record of £13.79. Sharesify flagged Rolls’ results as worth watching in our recent podcast (listen here).
The ‘burning platform’ inherited by CEO Tufan Erginbilgic three years ago has been transformed into a business which is now on fire. Remarkably, the stock topped the FTSE 100 performer leaderboard in 2023 and 2024, and was 4th last year.
| Rolls-Royce (RR.) | Price: £13.79 (+5.3%) | Market cap: £122.34bn |
For 2025 (to end Dec), the company posted underlying operating profit of £3.46 billion, ahead of the £3.27 billion consensus and delivering an improved operating margin of 17.3%. Free cash flow reached £3.3 billion, supported by strong engine flying hours, higher aftermarket activity, and continued growth in long‑term service agreement balances. It means Rolls ended the year with net cash of £1.9 billion.
Source: Rolls-Royce
Stronger and stronger
Looking to 2026, Rolls expects underlying operating profit between £4 billion-£4.2 billion, alongside free cash flow of £3.6 billion-£3.8 billion. Management signalled confidence in sustained demand across civil aerospace, defence, and power systems.
The medium‑term outlook was raised substantially. Rolls now targets underlying operating profit of £4.9 billion-£5.2 billion, far above the previous £3.6 billion-£3.9 billion range. Operating margin targets were raised from 15%-17% to a new 18%-20% range. Importantly, free cash flow guidance is now set at £5 billion-£5.3 billion, versus £4.2 billion-£4.5 billion previously.
Source: Rolls-Royce
$7 billion-$9 billion buyback
In short, this new cashflow optimism will help pay for a mega new share buyback that could reach £9 billion (£7 billion to £9 billion). The scheme starts today and will run through to end 2028. £2.5 billion will be executed this year. Rolls‑Royce declared a final dividend of 5p a share, taking the total 2025 payout to 9.5p.
Summerising the results, Jefferies analyst Chloe Lemarie called the results ‘another beat and raise with strong cash returns.’ RBC Capital Markets echoed the sentiment, noting that the upgraded 2028 targets and expanded buyback underscore Rolls‑Royce’s successful turnaround and improving financial footing.
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