Rolls-Royce Buyback Push Faces Headwinds as Geopolitical Tension Tests Aviation Recovery

Rolls-Royce executes £2.3bn buyback programme, acquiring 1.83M shares, as geopolitical risks weigh on aviation sector and stock falls 10% in a month.

The UK engine maker continues to scoop up its own stock at a steady clip, executing another tranche of its £2.3bn repurchase programme as the broader aviation sector contends with rising instability in the Middle East. Between 5 and 11 May, Rolls-Royce acquired 1.83 million shares through Morgan Stanley at a weighted average price of roughly 1,201 pence apiece, bringing the total bought back under the programme to 52.7 million shares since its launch on 26 February.

The pace of buybacks underscores management’s confidence in the company’s cash generation, even as the stock trades well below its February peak. After cancellation of the latest purchases, Rolls-Royce’s voting rights stand at around 8.375 billion. Combined with a completed interim programme, the group is on track to return as much as £2.5bn to shareholders this year.

Yet the shares remain under pressure from forces outside the company’s control. On a recent Thursday, the stock closed at €13.78 in London, having shed 9.17% over the preceding month. A separate session saw it edge down a further 2.06% to €13.80, with the 30-day decline reaching 10.24%. For all that, the long-term picture is brighter: over the past 12 months the equity has added roughly 46%, though it sits about 13% below the late-February high.

The slide has been driven largely by geopolitical anxiety. The intensifying US-Iran standoff and the risk of a blockade at the Strait of Hormuz have prompted airlines to cancel flights and reassess fuel procurement and route planning. The knock-on effect has hit engine suppliers across the board. GE Aerospace has fallen around 15% from its 2026 peak, while Safran has dropped more than 20%.

Rolls-Royce’s own assessment, however, is that the impact can be managed. The company has pointed to operational adjustments and capacity relocation elsewhere as buffers against any disruption in the region. That resilience is underpinned by momentum in its core business. First-quarter engine flying hours reached 115% of pre-pandemic levels, and the full-year target remains for 115% to 120%. The defence arm has recorded more than 20% growth in new equipment, while Power Systems carries an order backlog of £7.3bn.

Management has held firm on its 2026 guidance, sticking with underlying operating profit of £4.0bn to £4.2bn and free cash flow of £3.6bn to £3.8bn. The lower cost base and surging demand for power solutions to data centres provide a further tailwind. The balance sheet has also strengthened: rating agencies have lifted Rolls-Royce to A3 and A- respectively, and the group repaid a €750m bond from free cash flow.

On valuation, the stock looks cheaper than its US peer. Rolls-Royce trades at a forward price-to-earnings ratio of around 18, compared with nearly 35 for GE Aerospace. The EV/EBITDA multiple also favours the UK group: 20.9 versus 27.5. Analysts see revenues rising from an expected £22.7bn this year to £27.54bn by 2028.

Technically, the shares are holding above their 50-week exponential moving average, and a double bottom has formed in the area around 1,100 pence. A sustained defence of that level could open the path towards 1,420 pence. Near-term resistance is pegged between 1,213 and 1,225 pence.

The next major catalyst arrives at the end of July with the half-year results. Investors will focus on cash conversion, engine flying hours, shop visit volumes, and the pace of buybacks. If the civil aviation environment stabilises despite the Hormus risk, the repurchase programme will look well aligned with the profit outlook. Should airline disruption worsen, the durability of those targets will move centre stage.