Analysts Maintain Confidence in Rolls-Royce Despite Share Price Decline

While Rolls-Royce shares have faced significant downward pressure in recent weeks, market experts continue to express strong confidence in the British engine manufacturer's fundamental outlook. This divergence highlights a notable disconnect between the company's robust operational performance and its current market valuation.

Operational Performance and Revised Forecasts

The company's financial results tell a story of strength. For the 2025 fiscal year, Rolls-Royce reported a more than 40% increase in its underlying operating profit, reaching approximately £3.46 billion and surpassing its own guidance. In response to this powerful business performance, management has raised its financial targets. The firm now anticipates an operating profit between £4.0 billion and £4.2 billion for 2026. Looking further ahead, the goal is to grow this figure to as much as £5.2 billion by 2028.

Despite these upward revisions, the equity has lost nearly 20% of its value over the past month, with shares recently trading at €12.72.

Should investors sell immediately? Or is it worth buying Rolls-Royce?

Shareholder Returns Gain Momentum

A key pillar supporting analyst optimism is the company's clear commitment to returning capital to its investors. Rolls-Royce has reinstated dividend payments, declaring a total distribution of 9.5 pence per share for 2025. This move is complemented by a substantial share buyback initiative.

The company plans to return £7 to £9 billion to shareholders between 2026 and 2028, with £2.5 billion allocated for the current year alone. This program is already underway. At the end of March, the group acquired just over one million additional shares across various trading venues at an average price of 1,153.53 pence. These securities will be cancelled, resulting in a permanent reduction of the share capital.

Unwavering Analyst Conviction

The recent share price weakness has not shaken the positive stance of research analysts. They cite strong cash generation and promising growth avenues, including the government-backed small modular reactor (SMR) business, as reasons for their sustained bullish ratings.

• Goldman Sachs reaffirmed its "Buy" recommendation on March 25, with a price target of 1,400 pence.
• The market consensus, based on the views of 15 analysts, stands at "Strong Buy."
• The average 12-month price target among these experts is 1,442 pence.

The combination of double-digit profit growth, a multi-billion pound buyback scheme, and the resumption of dividend payments creates a solid financial foundation. Although the stock is currently experiencing a period of profit-taking, the upgraded medium-term targets through 2028 underscore the enduring profitability of the core business.

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