Rolls-Royce share price slumped by nearly 2% today, April 29, as signs of a prolonged war between the US and Iran rose. It retreated to 1,113p, down sharply from the year-to-date high of 1,418p. The stock will be in the spotlight ahead of the upcoming trading statement on Thursday this week.
Rolls-Royce Holdings’ trading statement to provide color on the Iran war
The RR share price has been in a freefall since the war started on February 28 this year. This retreat has mirrored that of other similar companies. GE Aerospace stock has dropped to $290 from the year-to-date high of $346. Similarly, RTX, the parent company of Pratt & Whitney, dropped to $175 from the YTD high of $215.
This decline is primarily because of the ongoing war in Iran, which has led to major travel disruptions. Traffic to the Middle East has continued falling, with the United Arab Emirates (UAE) seeking a bailout in the form of currency swaps from the US.
Airlines have started to slash trips, a trend that may continue in the future. Just last week, Lufthansa, a top Rolls-Royce customer, announced that it was cutting 20,000 trips this year to focus on highly profitable routes. Rolls-Royce’s business model depends on aircraft being in the air as it charges them per mile.
Analysts predict that the jet fuel crisis is set to continue as long as the Strait of Hormuz is blocked. As we reported earlier, Trump is considering a prolonged blockade, which explains why Brent has jumped to nearly $115.
At the same time, the war has led to a surge in aluminium prices, which may affect Rolls-Royce’s margins in the future. Steel prices have also jumped a bit this year.
Therefore, the upcoming trading report on Thursday will be important for the stock as it will provide more color on its business. This is important as the company has not yet released a statement highlighting the impact of the war on its operations.
The most recent results showed that Rolls-Royce’s business was doing well, helped by the resilient civil aviation business. This business made 10.38 billion pounds in revenue last year and a free cash flow of 2.5 billion pounds. Its revenue and FCF were up by 15% and 24% from a year earlier.
It was followed by the defense business, which made 4.7 billion pounds in revenue and 745 million in free cash flow. Its power business made 4.8 billion pounds and 648 million pounds in FCF. It hopes to benefit from the booming AI business by launching more products tailed to the sector.
Analysts believe that its annual revenue will eventually jump to 25.5 billion pounds in 2028 from 19.6 billion last year.
Rolls-Royce share price technical analysis
RR stock chart | Source: TradingView
The daily chart shows that the RR stock has dropped sharply in the past few months, moving from a record high of 1,413p to 1,120p today. It has now flipped the Supertrend indicator from green to red, a sign that bears are gaining momentum.
The stock has already crashed below the 50-day Exponential Moving Average (EMA) and the Ultimate Support of the Murrey Math Lines tool. Also, the Relative Strength Index (RSI) and the MACD have continued moving downwards.
Therefore, Rolls-Royce will likely continue falling in the near term, potentially to the support at 1,000p. The turnaround will only happen when there are signs that the US-Iran war is about to end.
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