Rolls-Royce stock (RR), a prominent British aerospace and defense company, has shown strong financial performance in 2024, which caused its stock price to reach an all-time high, followed by the revival of its dividend and stock buyback program.
The company’s strategic initiatives and market reactions have positioned it favorably in the defense sector.
Source: TradingView
Financial Results
Rolls-Royce stock showed strong performance in 2024, with revenue reaching £17.8 billion, and even declared a £1 billion ($1.27 billion) stock buyback program. The company manufactures jet engines for commercial aircraft along with power systems for ships and submarines, reporting 2024 operating profit of £2.46 billion, beating analyst expectations and reflecting an increase of 57% from the year prior. ⁽¹⁾
The company said robust delivery in 2023 and 2024 enabled it to meet its mid-term targets this year, two years ahead of schedule. Rolls-Royce has upgraded its mid-term targets for operating profit and cash flow. The group now foresees operating profit of £3.6 billion to £3.9 billion and free cash flow of between £4.2bn and £4.5 bn by 2028. ⁽²⁾
Rolls-Royce also announced a dividend of 6 pence per share, reinstating the payout after a five-year break, and said a £1 billion share buyback would be completed over the course of 2025. ⁽³⁾
Recent Highlights
Civil Aerospace Performance Driving Recovery
Rolls-Royce’s civil aerospace division has been a major part in its financial recovery, caused by increased demand for widebody aircraft engines. Rolls-Royce’s civil aerospace division has played a pivotal role in its financial recovery, driven by increasing demand for widebody aircraft engines.
Large engine flying hours have rebounded to 2019 levels while maintenance and service contract improvements have also contributed to greater profitability, as the company renegotiates key agreements for better cost recovery. ⁽⁴⁾
Looking ahead, Rolls-Royce projects growth in this segment, with large engine flying hours expected to reach 110-115% of pre-pandemic levels by 2025. The ongoing recovery may lead to improved cash flow and revenue, which could indicate financial strength. The company remains well-positioned to benefit from the long-term growth of global air travel. ⁽⁵⁾
Defense Sector Securing Major Contracts
Defense sector has secured its market position with major contract wins, including a £9 billion deal with the UK Ministry of defense for submarines. Rolls-Royce has also secured key US defense contracts, reinforcing its role in critical military systems. ⁽⁶⁾
The defense division has provided stable revenue. With global defense spending rising due to geopolitical tensions, Rolls-Royce’s experience in power systems maintains its popularity among militaries.
Power Systems Division Showing Strong Growth
Rolls-Royce’s power systems division has achieved strong growth in 2024, driven by increased demand for power generation and energy storage. The company is investing in next-generation engine technologies, set for a 2028 launch, with a focus on efficiency and sustainable fuel compatibility. These advancements could position Rolls-Royce as a leader in energy solutions. ⁽⁷⁾
What’s the Outlook?
Despite the strong results, Rolls-Royce is still trying to manage supply chain disruptions that are expected to affect the global economy in the future. The defence company is working on securing the availability of its parts and reducing operation risks. ⁽⁸⁾
Recovery of the civil aerospace sector remains important to Rolls-Royce’s continued success. While flying hours have surpassed 2019 levels, maintaining growth momentum is important for future revenue generation.
Competition in the defense sector remains intense, requiring continued innovation and efficiency improvements. Rolls-Royce will try to maintain its position by investing in next-generation technologies.
Overall, Rolls-Royce’s 2024 results mark an outstanding rebound, with higher operating profit, improved cash flow, and strengthened financial health. The dividend revival, share buyback programme, and upgraded growth targets demonstrate strong momentum heading into 2025.
