Rolls-Royce Holdings Plc raised its full-year profit and cash flow guidance after reporting strong first-half earnings, driven by robust demand across its civil aerospace, defense, and power systems businesses.
Rolls-Royce's first-half profit, up 46% year-over-year.
Revenue rose over 24% to £11.3 billion. The company now expects full-year underlying operating profit between £4.7 billion and £4.9 billion, up from the previous guidance of £4 billion to £4.2 billion. Free cash flow is expected between £3.8 billion and £4 billion, compared to earlier estimates of £3.6 billion to £3.8 billion.
This is the second time this year Rolls-Royce has raised its full-year guidance. Shares rose as much as 6% on the day of the announcement, before settling 3.6% higher in late trading. The stock was the top riser in the FTSE 100, jumping 5.5% in morning trade.
We have made significant operational and strategic progress in the first half of the year.
Rolls-Royce earned more from selling engines for widebody planes, military hardware, and artificial intelligence. In its civil aerospace division, revenues surged as long-haul flights recovered after the pandemic. The power generation unit experienced increased demand from data centers used by AI companies. CFO Helen McCabe said orders in the company's data center power business grew more than 50% in the first half.
In defense, the company has benefited from higher military spending since Russia's full-scale invasion of Ukraine in 2022. McCabe cited growing opportunities from the UK's defense investment plan and NATO's push for greater military investment. Rolls-Royce told shareholders it should benefit from commitments made at the recent NATO summit, including programs such as Saab GlobalEye and MQ-4C Triton, which use Rolls-Royce engines. CEO Erginbilgiç added that the company continued to establish its leading position in autonomous propulsion.
The stronger outlook for Rolls-Royce comes alongside a similar upgrade from BAE Systems, another UK defense group. BAE raised its profit and sales guidance, citing a highly volatile global threat picture. It expects earnings to rise by 10% to 12%, up from a previous estimate of 9% to 11%. BAE cited a contract to provide Turkey with training and support for 20 Typhoon aircraft, and a deal with the US to quadruple production of the infrared seeker for the Thaad interceptor missile. BAE also has a £5.9 billion contract with the British government to complete the HMS Dreadnought nuclear deterrent submarine.