Rolls Royce shares ascend 20% in early trading

Share price rebounded strongly as company helps provide much needed ventilators to the NHS

Article updated: 6 April 2020 9:00am Author: Ian Forrest

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  • Coronavirus has impacted the company with wide-body aircraft seeing a 25% drop in flying hours in the first quarter and a 50% fall in March
  • Group expects lower engine delivery and maintenance volumes in the coming months
  • As a result the company has withdrawn its previous guidance for 2020 as well as its final dividend
  • Recommendation: With the worldwide grounding of commercial aircraft having no end date, we continue with our ‘Hold’ recommendation

Shares in Rolls-Royce rebounded strongly this morning following a trading update from the aero engine manufacturer. The company is helping to organise the supply chain for new ventilator production in the UK. It said its efforts to deal with the technical problems of its Trent 1000 engines were paying off with fewer aircraft on the ground. However, it was no surprise to hear that coronavirus has impacted the company with wide-body aircraft seeing a 25% drop in flying hours in the first quarter and a 50% fall in March. Rolls-Royce said it expects lower engine delivery and maintenance volumes in the coming months. As a result, the company has withdrawn its previous guidance for 2020 as well as its final dividend.

The shares have risen 20% in early trading although the backdrop of them having fallen 57% in the previous month shouldn’t be overlooked. Yet, investors will be pleased to hear the company is getting on top of the long-running issues with the Trent engine, and also that defence activity has not been affected by coronavirus as of yet. However, there were few other positives for investors in this update. Before the coronavirus outbreak there were signs of improvement thanks to the efforts of CEO Warren East, but with the current grounding of so many commercial jets, for what may be an extended period, the short-term outlook remains difficult so the shares are no better than 'Hold.'


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.

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