Picture supply: Getty Photos
Rolls-Royce (LSE:RR) shares have gone nowhere for a month now. And whereas 4 weeks is just like the blink of an eye fixed for a long-term investor, I’m questioning whether or not shareholders is perhaps in for a dry spell transferring ahead.
Then once more, I assumed that six months again and the inventory has since superior one other 23%, simply beating the FTSE 100‘s 13% rise. It’s been a idiot’s recreation to doubt Rolls-Royce since mid-2022.
As an alternative, it has been a clever transfer to purchase shares whereas they had been taking a breather, particularly simply earlier than an earnings launch. And that’s the place we at the moment are, with Rolls-Royce as a result of report FY25 outcomes on 26 February.
So, ought to I purchase extra shares earlier than subsequent week? Let’s discover out.
What does current historical past say?
Again in February 2024, CEO Tufan Erginbilgiç reported a “step-change in efficiency“, with FY23 underlying working revenue of £1.6bn beating steering. The share value ended the day round 8% increased, and it was the same story in August for the half-year replace.
The most important bounce got here in February 2025 when the inventory rocketed 16% to 731p after the engine maker reported full-year revenue of £2.5bn and introduced a £1bn share buyback.
Crucially, the corporate revealed it was hitting its mid-term monetary targets two years forward of schedule. This was one of many largest single-day features within the firm’s historical past.
Rolls-Royce inventory was at it once more in July final yr when it rose round 8%, leaping above the symbolic 1,000p mark. It has by no means regarded again since and at present sits at 1,280p.
Priced for perfection
Clearly then, current historical past reveals that Rolls-Royce tends to maneuver dramatically upwards straight after key earnings releases.
In contrast, some shares have a behavior of falling straight after a report earlier than recovering over time as traders digest the contents. Others get a shrug of the shoulders from traders (typically companies with very predictable earnings).
Nevertheless, it’s value noting Rolls-Royce’s Q3 buying and selling replace in November. Regardless of administration confirming that enterprise was sturdy and reaffirming steering, the shares fell 2.5% afterwards.
My concern is that expectations are excessive and administration might not fulfill them. I hope I’m fallacious, in fact, however the inventory is buying and selling at 39 instances ahead earnings. At this value, solely perfection will do and that’s not assured.
Ready for dips
What I’m going to do then is nothing. I’ll hold holding my shares as a result of I’m nonetheless bullish on the long-term development alternatives.
To provide one instance, Erginbilgiç simply met with India’s chief Narendra Modi to unveil a large enlargement roadmap throughout defence, vitality and civil aviation. This can contain co-developing an engine for India’s next-generation fight jets.
Clearly India is a big market alternative, as is the broader Asian area. Then there are small modular reactors (SMRs), which look obligatory to satisfy internet zero targets and hovering electrical energy demand.
Nevertheless, with Rolls-Royce close to an all-time excessive and expensive, I’ll look ahead to a dip earlier than contemplating shopping for extra shares. Maybe we’ll get one subsequent week.
