Rolls-Royce share price targets 1,500p ahead of earnings and buyback

Rolls-Royce share price continued soaring last week and reached a record high as market participants waited for its financial results. It jumped to 1,353p, up by 120% in the last 12 months, bringing its market capitalization to over $152 billion. This rally may continue this week as it releases its financial results.

Rolls-Royce Holdings to announce record profits and buybacks

Rolls Royce stock price may continue soaring this week as it publishes its financial results on Thursday.

In a report during the weekend, Sky News reported that it was considering announcing a new share buyback program worth about £1.5 billion. A share buyback is a sign of confidence by the management and a way to boost the earnings per share.

The report also noted that it would announce record profits, and possibly boost its forward guidance.

Rolls-Royce has done well in the past few years, marking a major turnaround for a company whose Tufan Erginbilgiç called a burning platform shortly after becoming CEO a few years ago.

Its stock has jumped by nearly 2,000% from its lowest level during the pandemic, a period where it came close to bankruptcy.

This rally coincided with the recovery of the aviation industry and the ongoing surge in defense spending in Europe and the United States. At the same time, its power business benefited from the ongoing artificial intelligence (AI) boom.

Rolls-Royce’s surge has also coincided with the ongoing rally among other companies in the industry. For example, GE Aerospace stock has soared by 65% in the last 12 months, bringing its market capitalization to over $359 billion. Safran, which operates CFM, a joint venture with GE, has also soared in the past few years.

Rolls-Royce Holdings will publish its financial results this week, and according to Sky, the numbers will likely be better than expected and its previous guidance.

The most recent trading statement noted that its underlying operating profit for the year would be between £3.1 billion and £3.2 billion. Also, the management guided to its free cash flow being between £3 billion and £3.1 billion.

Therefore, based on the Sky report, chances are that it will report better results than these estimates. Also, the upcoming £1.5 billion buyback program will be higher than the £1 billion that it announced at the same time last year.

Rolls-Royce stock chart | Source: TradingView

The daily timeframe chart shows that the Rolls-Royce stock price has been in a strong bull run, making it one of the top gainers in the FTSE 100 Index.

It recently jumped above the key resistance level at 1,309p, invalidating the double-top pattern, a common bearish reversal sign in technical analysis. In this case, the neckline was at the year-to-date low of 1,188p.

The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA). It also rose above the Supertrend indicator, a sign that bulls remain in control for now.

Additionally, the Relative Strength Index (RSI) has rebounded and is nearing the overbought level of 70. The Stochastic Oscillator has moved to the overbought level. It also formed an ascending triangle pattern, a common continuation sign.

Therefore, the most likely scenario is where the stock continues rising as bulls target the next key resistance level at 1,500p. Ultimately, the bullish outlook will be invalidated if it falls below the neckline at 1,200p.