Rolls-Royce share price: Kepler lifts stance after ‘bold’ FCF target

Analysts upbeat on British engine maker after Capital Markets Day update

Rolls-Royce share price: Kepler lifts stance after ‘bold’ FCF target

Kepler Capital Markets has lifted its stance on price target on Rolls-Royce Holdings (LON:RR) following the engine maker’s recent Capital Markets Day. The move comes after Deutsche Bank also lifted its valuation on the shares, following what the broker argued was a bullish outlook for the medium-term.

Rolls-Royce’s share price fell in the previous session, giving up 2.57 percent to 916.00p. The decline was largely in line with the broader market selloff which saw the benchmark FTSE 100 index shed 172.43 points to end the session 2.24 percent in the red at 7,509.84, pressured by the escalating trade tensions between the US and China.

Kepler lifts stance on Rolls-Royce

Kepler lifted its rating on Rolls-Royce from ‘reduce’ to ‘hold’ yesterday, while also hiking its price target on the shares from 815p to 975p. WebFG News quoted the analysts as saying that they felt that the engine maker’s mid-term free cash flow targets of ‘at least’ £1.8 billion to £1.9 billion were quite ‘bold,’ far surpassing the analysts’ prior best assumptions of between £1.5 billion and 1.6 billion for the 2022-2023 period, leading to a ‘tangible impact’ on its valuation of the blue-chip group.

“We challenged them and concluded the targets are ambitious, but credible,” the broker pointed out, as quoted by the newswire.

Kepler further noted the group’s imminent disposal of its commercial marine unit as another potential benefit, with the Capital Markets Day having also provided proof that Rolls-Royce’s Power Systems unit has room to grow further, while Defence is expected to benefit from a better environment in the US.

Analyst ratings update

Deutsche Bank lifted its price target on Rolls-Royce from 868p to 880p last week, while Citigroup continues to see the British engine maker as a ‘buy,’ without specifying a valuation on the shares. According to MarketBeat, Rolls-Royce currently has a  consensus ‘hold’ rating and an average price target of 965.75p.

As of 08:07 BST, Tuesday, 26 June, Rolls-Royce Holding PLC share price is 916.00p.

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