Rolls-Royce Shares Started at Overweight by Barclays

Rolls-Royce (LON: RR.) shares are down more than 28% this year, but Barclays analyst Charlotte Keyworth is positive on the stock.

The aero-engine and luxury manufacturing business was significantly impacted by pandemic restrictions as it derives the majority of its revenue through the sale and maintenance of jet engines. Maintenance of those engines is charged per flying hour, making it a primary revenue driver.

However, with planes almost all grounded during the pandemic, the Rolls-Royce business suffered, although it is now seemingly recovering, with many market participants positive about its future prospects.

Keyworth told investors in a research note on Wednesday that she sees positive catalysts in regard to an engine flight-hour recovery and expectations of increasing Chinese demand once Covid restrictions in the country are lifted. In addition, the analyst, who assigned a 110p price target to Rolls-Royce shares, feels that negative sentiment on widebody aircraft is easing.

According to analyst rating firm TipRanks, out of nine analysts covering Rolls-Royce, two have assigned Buy ratings on the stock, with five at Hold and two at Sell. The average price target is 92.64p, representing a potential 2.25% upside. 

Rolls-Royce shares are up 1.75% at the time of writing on Wednesday, trading around the 90.66p mark.

US Navy Contract

On Tuesday, it was revealed that Rolls-Royce was awarded a $228 million US Navy logistics support contract. The firm-fixed-price, indefinite-delivery/indefinite-quantity contract is for sustaining engineering and logistics support services for the KC-130J aircraft propulsion system for the Navy, Marine Corps, and Foreign Military Sales customers.

The work is expected to be completed in November 2027.