Rolls-Royce Launches Fresh Share Repurchase Initiative

Rolls-Royce GB00B63H8491

Rolls-Royce is capping off 2025 with one of the most remarkable share price performances in the FTSE 100, and the momentum continues. In a move signaling robust financial health, the British engine manufacturer announced a new £200 million share buyback program in mid-December, set to commence in early January. This follows a year where the company's stock more than doubled in value.

The initiative underscores a dramatic turnaround in the group's finances. During the first half of 2025, Rolls-Royce generated a free cash flow of £1.58 billion—a figure that would have seemed unattainable just a few years ago. Management has reaffirmed its full-year guidance, targeting an operating profit between £3.1 and £3.2 billion and a free cash flow in the range of £3.0 to £3.1 billion for 2025, despite persistent supply chain challenges.

This new repurchase plan represents the second consecutive program. It follows the completion of a £1 billion buyback initiative that concluded in November. The latest program is scheduled to run from January 2nd until no later than February 24, 2026, and will be executed through UBS AG London Branch. Shares acquired will be cancelled, thereby reducing the total number in circulation.

Notably, the program’s end date falls just before the publication of the full-year 2025 results on February 26th.

Transformation Strategy Yields Results

The company's operational improvements are clear. Its operating margin climbed to 19.1% in the first six months of the year, driven by three key factors:
* A significant increase in large engine flying hours within the civil aerospace division
* Sustained demand from the defense sector
* The successful execution of a restructuring strategy under CEO Tufan Erginbilgic

Analyst Sentiment Remains Largely Positive

Market experts maintain a constructive view. Of the 18 analysts covering the stock, 13 advocate a 'buy' rating, while five suggest 'hold'. There are currently no 'sell' recommendations. The average price target stands at approximately 1,215 pence, indicating limited near-term upside from current levels.

Individual firms express continued confidence. JPMorgan retains its 'overweight' rating with a 1,320 pence target. RBC Capital Markets initiated coverage in November with an 'outperform' rating and a 1,275 pence target.

While the price-to-earnings (P/E) ratio appears moderate at 16-17, it rises to around 35 when adjusted for exceptional items. This elevated adjusted multiple leaves little room for performance disappointments.

All eyes are now on the full-year results announcement scheduled for February 26th. The report will reveal whether Rolls-Royce has met its 2025 targets and provide management's perspective on the outlook for 2026.