Rolls-Royce Holdings (LSE: RR.) shares have soared more than 1,200% in five years. And something regularly seems to give them an extra bit of impetus. It’s when the company under-promises, and then over-delivers on results. The next opportunity for that is 26 February — 2025 full-year results day.
Will a day come when Rolls posts results that even slightly disappoint? And might it kick off a downturn for the share price? It hasn’t happened yet. So what should we be looking forward to on that all-important Thursday?
Guidance? Confirmed!
With its latest trading update in November, the company said the year so far had gone according to expectations. And the board assured us it’s still sticking with its earlier guidance.
CEO Tufan Erginbilgic spoke of “further confidence in our full-year 2025 guidance of underlying operating profit of between £3.1bn and £3.2bn and free cash flow of between £3bn and £3.1bn despite continued supply chain challenges.“
That sounds brilliant — and was almost unimaginable five years ago.
Eyes on supplies
I find that bit about supply chain challenges nagging at me, however. It’s a risk that the company has very little control over, and it’s a potential cloud on the horizon. With a bit of luck, it might only be the business equivalent of a light fluffy cloud.
Still, in the first half, Rolls did report “a £150m-£200m cash impact related to the aerospace supply chain,” adding it expects “challenges to persist through 2025 and 2026.” And supply problems — aggravated by global tariff uncertainties — were noted across Rolls-Royce’s business divisions.
And before we extrapolate strong first-half results into the full year, Rolls cautions us to expect “a slightly lower delivery in the second half of 2025,” with “slightly lower free cash flow,” and “a slightly lower operating profit.”
Longer tem
This all focuses on Rolls-Royce’s existing profitable businesses. But all that recent growth surely has to slow down some time. There are only so many planes anyone wants in the air at any time. I don’t expect any real problems with aero engines and defence this time round, but my eyes are on the long term.
Rolls-Royce shares could increasingly depend on the development of the company’s nuclear power technology — its small modular reactors, or SMRs.
Global demand
With that interim update, Erginbilgic reminded us that “Rolls-Royce SMR was selected as the sole provider of the UK’s first small modular reactor programme.” Other countries are showing keen interest too, and the global rise in AI-led data centres could seriously ramp up demand.
The CEO reiterated that “we expect Rolls-Royce SMR to be profitable and free cash flow positive by 2030.” So that’s still a few years yet for SMR profit to supplement any potential slowdown in traditional business growth. And the first few years’ profits are probably not going to be huge. I’d like to see some SMR guidance updates.
My bottom line?
I still think investors could do well to consider Rolls-Royce shares even after they’ve reached such heights. And I’m optimistic about the upcoming results. But to fit my dividend-seeking strategy, I’m looking at the value share opportunities I see out there.
