Rolls-Royce remains bullish about its nuclear option
Despite an incredible year so far, the UK engineering giant believes there’s much more to come in 2026 and beyond. City writer Graeme Evans explains why.
13th November 2025 13:12
by Graeme Evans from interactive investor
A confident Rolls-Royce Holdings (LSE:RR.) update today kept alive City expectations that 2026 will bring renewed momentum for shares after their sideways run of recent weeks.
The engines giant reiterated the guidance it gave in July’s beat-and-raise interim results, which included the delivery of an underlying profit of between £3.1 billion and £3.2 billion in 2025.
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With no further upgrade in today’s year-end statement, the shares drifted as much as 21p to 1,131p. That’s still more than 90% higher across this year but down on late September’s 1,196p when the company’s valuation topped £100 billion for the first time.
The focus now turns to annual results on 26 February and potential new mid-term targets, given that Rolls has de-risked last year’s 2028 profit objective of £3.6-3.9 billion.
The company, which is now the fifth largest in the FTSE 100 index, continues to have strong backing in the City.
UBS first recommended buying the shares in March 2023 when they were at 153p and recently highlighted a further 18% upside for shares to a target price of 1,350p. Morgan Stanley has a target of 1,275p and an Overweight position.
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Today’s brief trading update highlighted strong demand in the largest division of civil aerospace, boosted by significant large engine orders from customers including Malaysia Airlines.
It is also encouraged by demand for the Trent XWB-97 powered Airbus A350F, notably from customers in Greater China and the Asia Pacific region.
Large engine flying hours for the ten months to the end of October grew by 8% year on year to 109% of pre-pandemic levels. That is slightly short of 2025 guidance, although Morgan Stanley believes the range of 110-115% is still achievable before the year end.
In power systems, Rolls said strong order intake continued to be underpinned by the growth in generation across data centres. Demand for products and services in the defence arm remains robust, it added.
Chief executive Tufan Erginbilgic said: “We are continuing to progress our transformation programme, delivering profitable growth, and further strengthening our balance sheet.”
He recently told the BBC that the group has the "potential" to become the UK's highest-valued company, with his optimism built around the company’s role in powering the data centres behind the adoption of artificial intelligence.
Erginbilgic estimates that the world will need 400 small modular nuclear reactors (SMRs) by 2050, a market he wants and expects Rolls to dominate.
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In the UK, Rolls-Royce SMR is on track to finalise commercial terms before the year end after being selected in June as the preferred technology provider by Great British Energy-Nuclear. It has also entered the US regulatory process, which it said was a critical step to paving the way for additional jobs and investment potential in the US.
Morgan Stanley said Rolls had produced another confident update in line with expectations but that the slight miss on engine flying hours and lack of an extension to the share buyback programme may have disappointed some investors.
The group paid an interim dividend of 4.5p a share in September and has nearly completed a £1 billion buyback programme, meaning the amount set to be returned to shareholders in 2025 will total £1.9 billion.
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