Rolls-Royce Holdings Plc has once again raised its annual financial outlook, with underlying operating profit now projected to be between £3.1 billion and £3.2 billion, an increase from the previous target of up to £2.9 billion. Free cash flow is also expected to improve, reaching as much as £3.1 billion, up from an earlier goal of £2.9 billion. This positive revision comes as the UK aircraft engine maker benefits from strong demand for its products and the success of its internal savings initiatives.
This marks a continued upward trend for Rolls-Royce, whose shares have soared to a record high. The company's transformation, spearheaded by CEO Tufan Erginbilgic since 2023, is credited for its renewed performance, with the stock climbing 400% in the last two years. Rolls-Royce's recent first-half results showed an underlying operating profit of £1.7 billion with a 19.1% operating margin, up from 14.0%.
A significant factor contributing to the improved outlook is the enhanced durability of its Trent engines. Rolls-Royce has improved the "time on wing" for its engines, meaning they spend more time in operation before requiring major maintenance, which directly boosts profits as the company earns revenue from engine flying hours. The company anticipates an over 80% improvement in Trent engine time on wing by 2027, extending it to as much as six years, making engines like the Trent 1000 highly competitive despite past issues. Rolls-Royce has also reported winning additional deals for the Trent 1000 engine.
In related news, Rolls-Royce announced a record stock buyback plan of up to £9 billion ($12 billion) through 2028, exceeding market estimates. This buyback is among the largest in UK corporate history and further reflects the company's robust financial health, driven by increasing orders for aircraft engines and power systems for data centers. The company also confirmed its small modular reactor program was selected by Britain to build three units.
