Rolls-Royce shares rise on CEO turnaround, Iran ceasefire hopes

Rolls-Royce shares rose to 1,283p after CEO Tufan Erginbilgiç highlighted the company’s turnaround and investors reacted to hopes of a US-Iran ceasefire that could reopen the Strait of Hormuz. The stock climbed from this month’s low near 1,050p.

In a recent interview Erginbilgiç outlined major achievements during his tenure and said the share price has climbed roughly tenfold since he became CEO. Management has cut thousands of roles and sold underperforming units to conserve cash and focus on higher-margin parts of the business.

Executives are pursuing a return to the narrow-body engine market and expanding into power equipment for data centers. The company continues to provide long-term engine service contracts and is developing offerings for new customer segments.

External trends have supported demand for engines and services. Aircraft engine orders have risen in recent years as carriers restore long-haul schedules. Reports of a potential short-term US-Iran ceasefire that would reopen the Strait of Hormuz have reduced some concerns about regional route risk and encouraged investor interest.

Rolls-Royce’s civil aviation services division earns most revenue from long-term contracts with carriers including Lufthansa, Delta Air Lines, Virgin Atlantic and IAG, and it also supports airlines such as Emirates, Singapore Airlines and Qatar Airways. Air traffic in the Middle East has largely normalized this year.

The company reiterated full-year guidance, forecasting operating profit of £4.0 billion to £4.2 billion and free cash flow of £3.6 billion to £3.8 billion. Management stated,

We remain strongly positioned to deliver our mid-term targets, with substantial growth beyond the mid-term from both our existing and new businesses.

Technically, the stock found a low around 1,053p before rallying to roughly 1,261p and is trading above its 50- and 100-day exponential moving averages and the Supertrend indicator. Traders are watching a potential move toward the year’s high of 1,418p while noting that a fall below about 1,000p would undermine the bullish case.

Investors will monitor company performance, progress against management targets and regional developments affecting aviation through the remainder of the year.