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Rolls-Royce is an industrial technology company that designs, manufactures, installs, repairs, and maintains aircraft engines, marine propulsion systems, and power-generation systems. The company was established by Sir Henry Royce and Charles Rolls in 1904 and is headquartered in Kings Place, London, UK. Rolls-Royce serves its customers through 3 core operating business segments: Civil Aerospace, Power Systems, and Defence.
Rolls-Royce is one of the most storied engineering companies in the world, and in the 20th century, it became famous for its luxurious cars (a division it was separated from in 1971). As early as 1906, the company had laid out a vision of providing propulsion on land, at sea, and in the air. Rolls-Royce was called upon to act on its vision during World War I when it started developing aircraft engines. This began its association with the military that continues to this day.
Over the subsequent years, the company took on expensive and ambitious development projects that eventually lead to its nationalisation in 1971 when it was faced with the threat of bankruptcy. The early 1990s were particularly tough for Rolls-Royce as the Persian Gulf conflict impacted the airline industry negatively. But the company implemented reorganisation strategies in the late 1990s, and the introduction of its more powerful and fuel-efficient Trent engines set it up for a dominant and successful new millennium. Rolls-Royce stepped into the 21st century with lucrative deals in Asia, and it cemented its status as a leading global manufacturer of power engines. Its money-spinning model of selling engines at cost in exchange for a lifetime service contract is the envy of its industry peers.
Rolls-Royce is listed on London Stock Exchange, where it trades under the ticker symbol RR. The stock is categorised in the Industrials sector, under the Aerospace & Defence industry.
Rolls-Royce Stock History
Rolls-Royce stock is quoted in GBX (British pence) rather than in pounds. The company has implemented one stock split in its history – a 5-for-1 on the 28th of August 2015.
RR stock hovered around 80p at the turn of the millennium and edged lower to just above 20p by March 2003. A turn of business fortune then triggered a rally that saw the stock soar to highs of just below 200p by June 2007. RR proved resilient during the 2007/8 global financial crisis, but it was dragged to lows of just below 100p by March 2009. The stock then embarked on a long-term rally that saw it print its all-time high at circa 440p in January 2014. A correction then followed that saw the RR stock fall below 180p by November 2015.
RR then began a mini-rally that topped out at circa 380p in August 2018, but some negative fundamentals then triggered a correction of the stock. Rolls-Royce had to deal with expensive fixes of its Trent engines as well as a Moody’s downgrade of its debt ability. Business results improved in 2019, but the COVID-19 pandemic of 2020 dampened investor mood, and RR tumbled to below 40p by October 2020. The stock then reclaimed the 100p-handle in the first half of 2021.
Despite its challenges, Rolls-Royce is a solid stock for investors due to its lucrative business model as well as regular dividends.
How to Trade the Rolls-Royce Stock
Here are the factors to consider when trading Rolls-Royce stock:
- Political and Legislative Issues
Rolls-Royce is seen as a national champion, but this has also meant that it can be influenced by political factors affecting the UK. Most notably, Brexit exposed the company to various risks such as shifting production facilities, supply chain concerns, and even changes in taxation regimes. As well, Rolls-Royce is also vulnerable to changes in legislative issues in the various jurisdictions that it has operations and customers. The legislative issues include intellectual property rights, environmental regulations, and employee safety concerns.
- Negative PR and Lawsuits
Rolls-Royce customers include major corporations and governments. This has, over the years, seen the company get entangled in numerous cases of corruption and bribery. The nature of its customers also means that negative headlines can generate major headwinds for the RR stock. A couple of bribery investigations have also been escalated into major lawsuits in the US, Brazil, and China that have later been resolved through high settlement payments.
- Periodic Earnings Reports
Rolls-Royce’s earnings report releases are very important calendar days for investors. This is because a main concern for the company in recent years has been its debt level. In fact, a downgrade by a rating agency in February 2021 pressured its stock lower, and investors are usually keen to follow on how its business is able to support its ballooning debt going forward.
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