Is the Rolls Royce Share Price a Bargain Ahead of Earnings?

Rolls Royce share price continued its recovery mode as UK stocks rebounded. The stock jumped to a high of 82.32p, which was the highest level since August 19 of this year. It has bounced back by more than 27% from its lowest level in October. Focus now shifts to the company’s upcoming earnings.

Rolls-Royce earnings preview

Rolls-Royce Holdings will publish its half-year financial results on Thursday. In all, there are signs that the company had a strong performance as the aviation industry bounced back. Recently, most airlines like Delta, IAG, Etihad, and Emirates have delivered positive outlooks about the industry. In some routes, demand for flying has risen above its pre-pandemic levels.

The civil aviation business is an important one for Rolls-Royce because of how the company makes mony. It makes most of its revenue from the long-term servicing contracts it has with airlines like Etihad and Emirates. These contracts are so lucrative such that, at times, the company sells its engines at a loss. 

Therefore, with the number of flying hours rising, analysts expect that the company’s business did well. One reason for this optimism is the recent earnings by General Electric (GE). In the earnings statement, the CEO said: 

“Our team is delivering, with strong Aerospace performance in the third quarter, fueled by the improving commercial backdrop and our progress managing operations and the supply chain environment,”

Another catalyst for Rolls Royce earnings is the defence industry. With the war in Ukraine continuing, analysts believe that the company’s business did well last quarter. Most western countries have announced that they will spend more money on defence in the coming years. 

Roll Royce share price forecast

The four-hour chart shows that the RR stock price has been in a strong bullish trend in the past few weeks. In this period, the stock rose above the important resistance level at 75p. It also rose above the 50% Fibonacci Retracement level. Rolls-Royce rallied above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) rose above the overbought level.

Therefore, the outlook of the Rolls-Royce share price is bullish ahead of earnings. This could see it rise to the next resistance at 90p. A drop below the support at 76p will invalidate the bullish view.

Rolls-Royce share price