Rolls-Royce Share Price Hits New Highs: What’s Behind the Surge?
The Rolls-Royce (LSE:RR) share price has continued to defy expectations, reaching new all-time highs despite fears of a slowdown in the air travel market. According to an analysis by The Motley Fool UK, the engineering giant’s stock price recently surpassed the 900p threshold for the first time this month, driven by a new catalyst emerging from China.
The Motley Fool UK reports that US tariffs were initially expected to be a significant concern for Rolls-Royce, but the new UK-US trade deal has eliminated those worries, allowing the company to export its engines and aircraft parts tariff-free. However, it’s not just the trade deal that’s got investors excited. As reported by Bloomberg, China is considering a large order of up to 500 Airbus planes from France rather than from Boeing in America. This development is significant for Rolls-Royce, as its engines are used on many Airbus wide-body aircraft, putting the company in a prime position to benefit from this deal.
The Motley Fool UK notes that even after delivering a massive 860% return for shareholders since the start of 2023, the aerospace stock may still have room to grow. Bank of America’s analysts have placed a share price target of 1,150p by this time next year, citing management’s mid-term targets of reaching £4.2bn-£4.5bn in free cash flow. This translates into a 28% potential gain from current trading levels.
The Motley Fool UK also highlights that the projected volume of free cash flow paves the way for substantially higher dividends. A payout of 6p a share was issued earlier this year, ending the company’s five-year dividend hiatus. Looking out to 2026, analysts have projected the Rolls-Royce dividend could reach around 9.7p. While this may not be groundbreaking for income investors, the forward yield of just shy of 1.1% could grow into something more substantial over time if the group’s free cash flow continues to surge.
However, as The Motley Fool UK notes, there are potential risks to consider. Bank of America’s analysts have flagged concerns surrounding the reliability of Rolls-Royce’s XWB-97 engine, as well as the company’s involvement in several complex projects, such as its small modular reactors and its UltraFan engine. Any failure or delays during development could affect the company’s financial performance.
Despite these risks, The Motley Fool UK concludes that there are more reasons to be optimistic than pessimistic about Rolls-Royce’s prospects. With management’s track record of defying expectations, investors may want to consider taking a closer look at the stock.
According to The Motley Fool UK, “even more so when factoring in management’s knack for defying expectations. That’s why, despite the tremendous growth seen to date, investors may want to consider taking a closer look.” The Motley Fool UK’s analysis suggests that Rolls-Royce’s share price could continue to rise, driven by its strong position in the market and its potential for growth.
The Motley Fool UK’s report also notes that Rolls-Royce’s engines are used on a number of Airbus’ wide-body engines, which puts the company in a lovely spot to benefit greatly from this deal, not just in terms of selling more engines but also the long-term revenue for servicing them throughout their operational lifetime.
In conclusion, The Motley Fool UK’s analysis suggests that Rolls-Royce’s share price has the potential to continue its upward trend, driven by its strong position in the market and its potential for growth. While there are risks to consider, the company’s track record of defying expectations and its potential for long-term growth make it an attractive option for investors.
Source: https://www.fool.co.uk/2025/06/09/rolls-royce-heres-the-latest-dividend-and-share-price-forecast/
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