Rolls-Royce share price boosted by new $2.6bn US contract

The Rolls-Royce share price climbs 7% as the aero engine maker wins a major new contract to power the US Air Force’s B-52 fleet.

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Rolls-Royce (LSE: RR) revealed Monday it’s won a new contract to supply and maintain engines for the US Air Force. Through its North America arm, the group will supply American-made Rolls-Royce F-130 engines to power the B-52 Stratofortress fleet. The Rolls-Royce share price jumped 7% in early trading as a result.

The contract, worth up to $2.6bn (£1.9bn), is part of the Air Force’s Commercial Engine Replacement Program (CERP). And in winning it, Rolls has beaten previous supplier Pratt & Whitney, part of Raytheon. The replacement should keep the B-52 fleet operational until 2050.

Craig McVay, senior vice-president of Strategic Campaigns Rolls-Royce Defence, said: “This is a major win for Rolls-Royce. We’ve been planning and preparing for this outcome and are ready to hit the ground running to prove that we are the best choice for the Air Force and the B-52.”

650 new engines

The F-130 engine, it seems, is ahead in efficiency and range, and requires less maintenance. The required 650 new engines will be manufactured at the Rolls-Royce plant in Indianapolis, Indiana.

This positive news comes at a time when Rolls-Royce is in the process of selling off its Spanish business to private equity firm Bain Capital. That’s been facing some opposition from local authorities concerned about job losses, so it’s not certain yet.

Rolls-Royce share price gaining

This morning’s jump in the Rolls-Royce share price is only part of the stock’s recent upwards run. Rolls shares have now spiked up 32% since 15 September, after a week of positive news on the aviation front. We’re still looking at a 48% drop over two years mind, taking in the pandemic effect.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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