I’m very grateful to be an investor in Rolls-Royce (LSE:RR.) shares. They’ve done tremendously well in recent years, and I’m a huge admirer of CEO Tufan Erginbilgiç, who has spearheaded the company’s turnaround from its pandemic lows.
But they say all good things come to an end. Will 2026 be the year that the party stops for Rolls-Royce shareholders like me? I had a close look at what the leading City analysts think about the FTSE 100 company’s prospects for next year. Let’s dig into the detail.
A conservative consensus
I find it useful to look at broker forecasts every so often. They don’t play a huge role in my investment decisions, since nobody has a crystal ball, so I prefer to rely on my own convictions and independent analysis. Nonetheless, it’s always a good idea to canvass external opinions.
Among the leading analysts covering Rolls-Royce shares, I’m pleased to say the recommendations are broadly positive.
| Recommendation | Number of analysts |
|---|---|
| Buy | 3 |
| Outperform | 11 |
| Hold | 5 |
| Sell | 0 |
| Strong sell | 0 |
Although none of the leading brokers are bearish enough to give Rolls-Royce a ‘Sell’ or ‘Strong sell’ rating, the consensus 12-month share price target of 1,250p is only a little bit higher than where the stock trades today. Considering Rolls-Royce shares almost doubled in value this year, that would be a significant slowdown in growth.
While I wouldn’t say it’s an expert stock picker, I was also curious to get the thoughts of ChatGPT. After all, AI is playing an ever-growing role in our lives. The chatbot was even more cautious, predicting the share price would finish next year at 1,200p. Well, it turns out that I’m a bit more optimistic than most analysts, both robots and humans!
My view
Rolls-Royce shares used to be a turbulent ride, with the firm almost going bankrupt when Covid-19 struck. But the route to recovery, and then unprecedented highs, has been remarkably smooth. There’s not much in recent financial updates to suggest the company can’t continue to outperform next year, in my view.
Rolls-Royce recently reaffirmed its guidance for FY25, with results due on 26 February 2026. That means investors can expect underlying operating profit between £3.1bn and £3.2bn, and free cash flow between £3bn and £3.1bn.
Large-engine flying hours for civil aerospace comfortably surpassed pre-pandemic levels this year marking a crucial milestone for the group’s largest division. And in today’s uncertain world, the defence business goes from strength to strength. The latest highlight is a deal for the UK to export 20 Eurofighter Typhoon aircraft to Türkiye, powered by Rolls-Royce’s EJ200 engines.
That said, I can see why excitement for Rolls-Royce shares is cooling among institutional analysts. Trading at a forward price-to-earnings (P/E) ratio above 37 and a price-to-sales (P/S) ratio above five, there’s little room for error in today’s valuation. A disappointing set of results could deal a nasty blow to the share price, especially after such astronomic gains in recent years.
I’ve prepared for that eventuality by diversifying my portfolio across multiple companies in different sectors. But, I’ll be keeping Rolls-Royce in there for now, and I reckon it could beat the consensus view once again in 2026.
