u/chongkim74

The positive move is holding this morning.

Rolls-Royce Holdings⁠ is trading around 1,572p (£15.72) in London, up about 2.0% from Friday’s 1,541p close. Today’s range has been approximately 1,551p–1,573p, putting the stock only about 0.8% below its 52-week high of 1,585.2p.
More importantly, I found one new technology development today: Rolls-Royce and TCS reported successful testing of a modified aero gas turbine through a full simulated flight cycle using 100% hydrogen. Rolls-Royce says the lessons from the program will support future propulsion technologies, including UltraFan. That’s technically encouraging, although I would rate it moderately positive rather than a major earnings catalyst.
I checked specifically for the big catalysts: there is still no new UK UltraFan 30 funding decision today, and no new Airbus/Boeing narrow-body engine selection. The existing UltraFan program still has €64 million of EU funding and is targeting ground testing of the UltraFan 30 demonstrator in 2028.
So today’s picture is 🟢 positive: RR is approaching its recent high again, without a major new company-specific catalyst. A clean move above roughly 1,585p would put the London shares into new 52-week-high territory.
For RYCEY in the U.S., today’s strong London performance is a favorable setup when U.S. trading gets underway, although currency movements and OTC trading can cause the percentage move to differ.

Rolls-Royce is up strongly in London this morning.

Rolls-Royce Holdings shares are trading around 1,568–1,572 pence (£15.68–£15.72), approximately +1.7% to +2.0% today, versus Friday’s close of 1,541p. The shares are now very close to the 52-week high of 1,586p (£15.86).
🟢 Important new development today
Citi has substantially increased its Rolls-Royce price target — by almost 50%. Citi raised its target from 1,101p to 1,647p (£16.47) after materially increasing its longer-term forecasts for Rolls-Royce.
That’s important because the London stock is already around £15.7, and Citi’s upgrade provides additional institutional support for the recent revaluation.
The broader UK market is only modestly higher today—the FTSE 100 was up roughly 0.1%—while Rolls-Royce is one of the stocks helping lift the index. That means today’s roughly 2% RYCEY/RR move is substantially stronger than the overall London market.
My interpretation for RYCEY today
This is positive. Rolls-Royce is approaching its recent record/high area again:
£15.86: important near-term resistance/high
£15.70: approximately today’s London level
£16.47: new Citi target
If London can break and hold above £15.86, that would be an encouraging technical development and could help RYCEY challenge its recent U.S. highs again.
I also specifically checked UltraFan and SMR this morning. I do not see a new UK UltraFan funding decision or a new major SMR award yet. Those remain much larger potential catalysts than today’s analyst-target increase.

Yes. Taking into account what Rolls-Royce⁠ is already earning before the full benefit of SMRs or a successful narrow-body entry, I think a modest—not aggressive—3-to-5-year RYCEY target is roughly $28–$35, with a stronger execution case reaching $40+.
The reason I am more comfortable with that range now is that the underlying business has improved substantially. Rolls-Royce just raised 2026 underlying operating-profit guidance to £4.7–£4.9 billion, while its existing 2028 target is £4.9–£5.2 billion operating profit and £5.0–£5.3 billion free cash flow. It also plans £7–£9 billion of share repurchases through 2028.
More importantly, those 2028 targets do not require Rolls-Royce to become a huge SMR or narrow-body-engine business to work. The existing Civil Aerospace, Defense and Power Systems businesses are already driving the targets. That makes SMR and narrow-body engines potential additional upside rather than the entire justification for today’s valuation.
How I would model 2029–2031
Scenario
3 years (~2029)
5 years (~2031)
What would need to happen
Conservative
$22–$27
$25–$30
Existing businesses grow, but SMR/narrow-body progress slowly
Modest/base case
$27–$32
$30–$35
Strong aerospace + defense + data centers; SMR execution progresses
Strong
$32–$38
$38–$45
SMRs gain additional customers and UltraFan wins a major aircraft program
Exceptional
$40+
$50+
Airbus/Boeing selection + major SMR expansion + continued earnings beats
I would therefore use about $30 in three years and $35 in five years as reasonable planning numbers rather than assuming $40–$50.
Why SMR could become important
This is no longer just a theoretical project. Rolls-Royce SMR has signed a contract to supply three SMRs in the UK, and commercial terms have been signed with ČEZ for the first of potentially six SMRs in the Czech Republic. Rolls-Royce said both programs have entered execution and begin generating revenue and profit in 2026.
The important distinction is that the first SMR will not suddenly produce billions of profit when it is manufactured. The financial benefit should build gradually through engineering, manufacturing, deployment and eventually a larger fleet of reactors.
Narrow-body engines could be the bigger valuation surprise
If the UK supports UltraFan 30 and Rolls-Royce subsequently gets selected by Airbus, Boeing, or both, I would move my long-term range materially higher.
The initial engine sales themselves aren’t necessarily the most attractive part. Rolls-Royce could potentially establish an enormous installed base and then earn maintenance and service revenue for decades, similar to its wide-body model.
That is why I would distinguish between:
UK funding: positive catalyst.
Successful UltraFan demonstrator: more important.
Airbus/Boeing selection: potentially transformational.
Thousands of engines entering service: major long-term earnings opportunity.
And there are several other growth engines
The investment case isn’t only SMR + UltraFan. Rolls-Royce is also benefiting from stronger wide-body aftermarket economics, improving Trent durability, rising defense spending, business aviation, data-center power generation and better profitability on new engine deliveries. Management specifically attributes its higher 2028 targets to stronger Civil Aerospace aftermarket economics and Power Systems growth.
So $30–$35 does not require everything to go perfectly.
Even my modest $30–$35 scenario would represent roughly 4.8×–5.5× your original purchase price.
The scenario I would pay the most attention to is $35–$45 by 2031 if Rolls-Royce simultaneously delivers its existing 2028 targets, successfully commercializes the first SMRs, and wins a place on at least one next-generation narrow-body aircraft. That’s where I think the investment story could change substantially from today’s already-strong turnaround story into a genuine long-duration growth story.
I firmly believe Mr. Tufan will get the deal or two for narrow body within 6 months.

Yes. Taking into account what Rolls-Royce⁠ is already earning before the full benefit of SMRs or a successful narrow-body entry, I think a modest—not aggressive—3-to-5-year RYCEY target is roughly $28–$35, with a stronger execution case reaching $40+.
The reason I am more comfortable with that range now is that the underlying business has improved substantially. Rolls-Royce just raised 2026 underlying operating-profit guidance to £4.7–£4.9 billion, while its existing 2028 target is £4.9–£5.2 billion operating profit and £5.0–£5.3 billion free cash flow. It also plans £7–£9 billion of share repurchases through 2028.
More importantly, those 2028 targets do not require Rolls-Royce to become a huge SMR or narrow-body-engine business to work. The existing Civil Aerospace, Defense and Power Systems businesses are already driving the targets. That makes SMR and narrow-body engines potential additional upside rather than the entire justification for today’s valuation.
How I would model 2029–2031
Scenario
3 years (~2029)
5 years (~2031)
What would need to happen
Conservative
$22–$27
$25–$30
Existing businesses grow, but SMR/narrow-body progress slowly
Modest/base case
$27–$32
$30–$35
Strong aerospace + defense + data centers; SMR execution progresses
Strong
$32–$38
$38–$45
SMRs gain additional customers and UltraFan wins a major aircraft program
Exceptional
$40+
$50+
Airbus/Boeing selection + major SMR expansion + continued earnings beats
I would therefore use about $30 in three years and $35 in five years as reasonable planning numbers rather than assuming $40–$50.
Why SMR could become important
This is no longer just a theoretical project. Rolls-Royce SMR has signed a contract to supply three SMRs in the UK, and commercial terms have been signed with ČEZ for the first of potentially six SMRs in the Czech Republic. Rolls-Royce said both programs have entered execution and begin generating revenue and profit in 2026.
The important distinction is that the first SMR will not suddenly produce billions of profit when it is manufactured. The financial benefit should build gradually through engineering, manufacturing, deployment and eventually a larger fleet of reactors.
Narrow-body engines could be the bigger valuation surprise
If the UK supports UltraFan 30 and Rolls-Royce subsequently gets selected by Airbus, Boeing, or both, I would move my long-term range materially higher.
The initial engine sales themselves aren’t necessarily the most attractive part. Rolls-Royce could potentially establish an enormous installed base and then earn maintenance and service revenue for decades, similar to its wide-body model.
That is why I would distinguish between:
UK funding: positive catalyst.
Successful UltraFan demonstrator: more important.
Airbus/Boeing selection: potentially transformational.
Thousands of engines entering service: major long-term earnings opportunity.
And there are several other growth engines
The investment case isn’t only SMR + UltraFan. Rolls-Royce is also benefiting from stronger wide-body aftermarket economics, improving Trent durability, rising defense spending, business aviation, data-center power generation and better profitability on new engine deliveries. Management specifically attributes its higher 2028 targets to stronger Civil Aerospace aftermarket economics and Power Systems growth.
So $30–$35 does not require everything to go perfectly.
Against your $6.31 average cost, even my modest $30–$35 scenario would represent roughly 4.8×–5.5× your original purchase price.
The scenario I would pay the most attention to is $35–$45 by 2031 if Rolls-Royce simultaneously delivers its existing 2028 targets, successfully commercializes the first SMRs, and wins a place on at least one next-generation narrow-body aircraft. That’s where I think the investment story could change substantially from today’s already-strong turnaround story into a genuine long-duration growth story.
It’s not exponential anymore but it’s secure and will provide you with sustainable growth…

Material update: Rolls-Royce shares hit another new 52-week high.
Rolls-Royce shares rose 2.68% on August 5, closing at £15.70 in London and setting a new 52-week high, surpassing the previous record set just one day earlier.
Why it matters:
Investors are continuing to revalue Rolls-Royce after the company raised its 2026 outlook last week. Management now expects £4.7–£4.9 billion in operating profit and £3.8–£4.0 billion in free cash flow for 2026, both well above previous guidance.
The company’s strong performance is being driven by all three major divisions: civil aerospace, defense, and power systems, with particularly strong demand from data centers and defense customers.
Rolls-Royce reaffirmed its longer-term 2028 targets and plans for £7–£9 billion in share buybacks through 2028.
What has not happened yet:
There is still no announcement regarding UK government funding for the UltraFan narrow-body engine program and no Airbus or Boeing engine-selection decision. Those remain the biggest potential catalysts for RYCEY over the next two years.

Rolls-Royce Holdings increased its full-year guidance after reporting very strong first-half results:
Underlying operating-profit guidance increased from £4.0–£4.2 billion to £4.7–£4.9 billion.
Free-cash-flow guidance increased to £3.8–£4.0 billion.
First-half operating profit rose 46% to £2.5 billion on revenue of £11.2 billion.
The stock rose more than 5% in London following the announcement.
Why it matters
This is a significant positive development because it implies that Rolls-Royce’s turnaround is accelerating faster than investors expected. The upgrade was driven by stronger profitability across all three major divisions—civil aerospace, defense, and power systems—which could lead analysts to raise earnings forecasts and price targets.
Key business drivers
Higher profitability from aircraft-engine maintenance contracts.
Strong demand for military engines and autonomous-defense propulsion systems.
Continued growth in the power-systems business, fueled by AI data-center demand.
Additional strategic development
Management stated that it expects more than a 100% improvement in Trent-engine durability (“time on wing”) by the end of 2027 and reaffirmed its target of £4.9–£5.2 billion in operating profit by 2028.

I hope that the pre-trade 4% increase is a beginning to go up for few days to our new bottom around $21 and $22.

Let’s see what happens until early next week.

The £700 million increase in Rolls-Royce’s full-year operating-profit guidance (from about £4.1 billion to about £4.8 billion) does not translate directly into a fixed stock-price increase. The market values the company based on future earnings over many years, not just one year’s profit.
A rough estimate can be made using Rolls-Royce’s price-to-earnings (P/E) multiple.
Simple calculation
Additional annual profit:
£700 million
Suppose investors value Rolls-Royce at 20–25 times earnings:
At 20×: £700 million × 20 = £14 billion increase in market value.
At 25×: £700 million × 25 = £17.5 billion increase in market value.
Rolls-Royce has approximately 8.5 billion shares outstanding.
That implies:
£14 billion ÷ 8.5 billion shares = about £1.65 per share
£17.5 billion ÷ 8.5 billion shares = about £2.05 per share
Converted to U.S. dollars (approximately):
$2.20–$2.75 per ADR
Example
If RYCEY was trading at $14.00 before the earnings report, the higher guidance alone could theoretically justify a price of roughly:
$16.20–$16.75
However, the market had already expected some improvement before the announcement, so the actual stock move was much smaller.
Why the stock did not immediately jump by $2–$3
Investors are asking:
Is the extra £700 million sustainable in 2027 and beyond?
How much comes from one-time factors?
Will airline demand remain strong?
How much will AI data-center growth contribute?
Will UltraFan and small modular reactors add future profits?
If investors become convinced that the additional earnings are permanent, RYCEY could appreciate much more over the next one to two years than it did on earnings day alone.
For example, if the market starts valuing Rolls-Royce as a company capable of earning £5–6 billion annually for many years, the stock could trade substantially higher.

A premarket price of $19.27 for RYCEY after such strong earnings may seem disappointing, but there are several reasons why the stock did not jump much higher.
1. Much of the good news was already priced in
Rolls-Royce had already risen dramatically over the past two years as investors anticipated:
Higher aircraft-engine flying hours
Improving profit margins
Strong defense spending
Growth in the Power Systems business
Share buybacks and dividends
Because investors expected strong results, part of the earnings surprise was already reflected in the stock price.
2. Investors care more about future years than 2026 alone
The market is asking:
Can Rolls-Royce earn £5–6 billion annually in 2027 and 2028?
Will airline demand remain strong if the global economy slows?
How much of the profit increase came from one-time improvements?
Can the company maintain its high margins?
If investors are uncertain, they may wait before pushing the stock significantly higher.
3. Profit-taking
Many institutional investors who bought RYCEY at much lower prices may be taking profits after the earnings release. Even excellent earnings can trigger selling if traders decide to lock in gains.
4. The valuation is already much higher
At around $19–$20, Rolls-Royce’s market value already reflects substantial expectations for future growth. To justify a move to $22–$25 quickly, investors would likely need evidence that:
The new profit guidance will continue rising in 2027.
UltraFan will win major contracts.
Small modular reactors will generate meaningful revenue.
Data-center demand will accelerate further.
5. U.S. premarket trading volume is limited
RYCEY is an ADR traded over the counter in the United States. Most price discovery occurs in London, where Rolls-Royce’s primary shares trade. U.S. premarket moves can sometimes understate the market’s true reaction.
What would justify a much higher price?
Using rough estimates:
$20–$22 would imply investors believe £4.7–£5.0 billion of annual profit is sustainable.
$25+ would likely require confidence that Rolls-Royce can earn £5.5–£6.0 billion annually within a few years.
The biggest positive takeaway from these results is not today’s premarket price—it’s that management increased full-year profit guidance by about £700–800 million, which could support higher valuations over time if the improvement proves durable.

Rolls-Royce (RYCEY) 2026 Half-Year Results: Detailed Breakdown
Overall financial performance
Rolls-Royce reported an exceptionally strong first half of 2026:
Revenue: £11.2 billion (up 24% from the first half of 2025)
Underlying operating profit: £2.5 billion (up 46%)
Operating margin: approximately 22%
Free cash flow: about £2.6 billion
Net debt continued to decline, strengthening the balance sheet.
Because of this strong performance, management raised its full-year guidance:
Previous operating-profit forecast: £4.0–£4.2 billion
New operating-profit forecast: £4.7–£4.9 billion
Previous free-cash-flow forecast: £3.6–£3.8 billion
New free-cash-flow forecast: £3.8–£4.0 billion.

1. Civil Aerospace (the largest business)
This division manufactures and services engines for large aircraft such as the Airbus A350 and Boeing 787.
Positive developments
Long-haul international travel remained strong.
Airlines continued flying aircraft at high utilization rates.
Engine-maintenance contracts became more profitable.
Rolls-Royce eliminated its backlog of grounded aircraft waiting for engine parts.
Aftermarket maintenance revenue increased substantially.
Civil Aerospace margins increased to 25.3%, one of the strongest performances in years.
Why this matters
Rolls-Royce earns a large portion of its profits from servicing engines over decades. More flying hours mean:
More inspections
More repairs
More replacement parts
More long-term revenue
This business segment is the primary reason investors are optimistic about Rolls-Royce’s future.

2. Defense division
The defense business includes engines for:
Military aircraft
Submarines
Naval vessels
Government programs
Positive developments
Higher military spending in Europe and NATO countries.
Continued demand for defense-engine maintenance and support.
Progress in the Global Combat Air Programme (GCAP).
Why this matters
Defense contracts are generally:
Long term
Stable
Less affected by recessions
Increasing geopolitical tensions have strengthened demand for Rolls-Royce’s defense products.

3. Power Systems division
Power Systems includes:
MTU diesel engines
Backup generators
Data-center power systems
Positive developments
Explosive demand from AI data centers.
Growing electricity demand from cloud-computing infrastructure.
Strong industrial and energy markets.
Why this matters
This is becoming a major new growth driver for Rolls-Royce. As artificial intelligence expands, data centers need reliable backup power, and Rolls-Royce’s MTU systems are benefiting significantly.

4. Shareholder returns
The strong cash flow gives Rolls-Royce more flexibility to:
Continue share buybacks
Increase dividends
Reduce debt
Invest in future technologies
Investors generally view strong free cash flow as one of the healthiest signs for a company.

5. Future growth projects investors are watching
UltraFan
Rolls-Royce is seeking government support to develop its next-generation UltraFan engine.
Potential benefits:
Re-entering the narrow-body aircraft market.
Decades of future maintenance revenue.
Competition with GE Aerospace and Pratt & Whitney.
Small Modular Reactors (SMRs)
Rolls-Royce continues developing nuclear SMRs.
Potential benefits:
Long-term energy revenue.
Exposure to the global nuclear-power market.
New opportunities outside aviation.

Key risks
Despite the strong results, investors are still monitoring:
A global recession reducing air travel.
Delays in UltraFan funding.
Supply-chain problems.
Rising competition.
Delays in SMR approvals.

Bottom line
The biggest surprise in these results was not simply that profits increased—it was how much management raised its forecast.
Rolls-Royce now expects up to £4.9 billion in operating profit for 2026, compared with its previous target of £4.2 billion, suggesting that the turnaround under CEO Tufan Erginbilgiç is progressing faster than many investors expected.