Rolls-Royce Shares (LON: RR) Make Further Highs, As Rally Continues At Pace

Rolls-Royce Holdings plc (LON: RR) has surged to a new 52-week high, hitting 895.20p in trading today, up 3% on the day, and marking a continuation of its impressive upward trajectory. This milestone reflects a confluence of factors, including a successful strategic overhaul, robust financial performance, positive analyst sentiment, and tailwinds from both the defense and civil aerospace sectors.

The stock’s remarkable 94% growth over the past year sounds impressive enough when taken in isolation, but when considered against the 5 year increase of 632.50%, this has been a momentum name that has proven very tricky to catch. A glance at the 5 year chart below demonstrates the ascent better than we can with words.

Rolls-Royce reported yesterday the an agreement to supply a second large battery storage system in 2025 to Zeewolde in the Netherlands. The latest in a line of recent successes.

The transformation spearheaded by CEO Tufan Erginbilgiç since January 2023 is arguably the most significant driver of Rolls-Royce’s resurgence. His four-point plan, aimed at restoring operating profit margins and resuming dividend payouts, has yielded impressive results.

The civil aerospace division has nearly tripled its profit margins, even as flying hours return to pre-pandemic levels. The prospect of future growth in the defense and power systems sectors, coupled with innovative developments such as the UltraFan engine for narrow-body jets, further bolsters the company’s long-term prospects.

This strategic shift has translated into tangible financial gains. In February 2025, Rolls-Royce reported an underlying profit of £2.5 billion, exceeding market expectations. The company has reinstated dividends, proposing a 6p per share payout – the first since before the pandemic. A £1 billion share buyback program was also announced, signaling management’s confidence in the company’s financial health.

The defense sector is also providing significant tailwinds. Rolls-Royce secured a record £9 billion contract with the UK Ministry of Defence to supply nuclear reactors for the Royal Navy’s submarine fleet. This deal is expected to create over 1,000 new jobs and safeguard 4,000 existing positions, securing long-term revenue streams for the company.

Furthermore, the civil aerospace division is experiencing a recovery, with increased flying hours for wide-body aircraft engines as global travel rebounds. Rolls-Royce’s commitment to sustainability, demonstrated through its investment in sustainable aviation technologies, including participation in the first net-zero transatlantic flight with Virgin Atlantic, positions the company favorably in the evolving landscape of the aviation industry.

The recent reduction of US tariffs on British-made cars has also provided a boost, with Rolls-Royce’s share price rising by 3.7% following the announcement, reflecting investor optimism about improved trade relations and potential sales growth in the US market.

Analysts have largely responded favourably to Rolls-Royce’s turnaround story. JPMorgan Chase & Co. reaffirmed an “Overweight” rating with a price target of GBX 900 in March, suggesting further upside potential. The high mark on the street at 1,150p remains significantly to the upside, however the bear outlook of 240, and average of 835 indicate a gulf in sentiment.

Despite the overwhelmingly positive price action, investors should be aware of potential risks. The previously mentioned divergence between volume and price warrants attention, as it could signal a potential slowdown in momentum. Furthermore, reliance on government contracts and the cyclical nature of the aerospace industry could present challenges.

With the share price in unknown territory at all time highs, with no resistance to speak of, RR is currently continuing in a phase of price discovery, where markets continue to reprice expectations. For now, momentum is clearly continuing to remain bullish, although April’s pullback demonstrates dramatic drawdowns are possible if conditions change.