Rolls-Royce soars 7% as it sets out ambitious mid-term targets

Shares of British engine maker Rolls-Royce Holdings (LSE: RR) rose 7.4% Tuesday morning after the company announced ambitious financial targets for 2027 and plans to exit or reduce its stake in subsidiary Rolls-Royce Electric.

In a “step change” for performance, Rolls-Royce is targeting 2027 operating profit between £2.5 billion and £2.8 billion, operating margins of 13-15%, free cash flow of £2.8-£3.1 billion, and return on capital of 16-18%. For comparison, in 2022 Rolls-Royce reported £652 million in operating profit and 5.1% margins.

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The company also plans to raise £1-1.5 billion through asset sales over five years, including fully or partially divesting Rolls-Royce Electric. Recent trading has been in line with full-year expectations, and 2023 profit and cash are expected to be “materially ahead of 2022.”

Rolls-Royce shares have surged 161% year-to-date.