Rolls Royce share price declined by almost a percentage point yesterday as investors continued to turn away from the industrial giant. The loss could accelerate today as the market continues to react to the disappointing earnings from General Electric, its biggest rival. Rolls Royce shares are trading at 260p, which is a few points above its lowest point in 2009.
InvestingCube's S&R Levels
Not in Sell Zone
Rolls Royce history of underperformance
Rolls Royce, the giant British industrial conglomerate, has been a key laggard in the past few years. As shown below, the stock has dropped by more than 66% in the past five years. In the same period, the S&P 500 has gained by more than 56% while the FTSE 100 has dropped by just 2%.
General Electric, its key rival has been worse, considering that its share price has fallen by more than 70%. The same trend has continued in the past one year as Rolls Royce share price has fallen by more than 70%.
Ironically, Rolls Royce stock has underperformed at a time when the world of aviation was going through its best years. For one, the number of people travelling internationally has almost double and more airlines have been placing huge orders. Part of the reason behind Rolls Royce share price underperformance was the problems with the Trent 1000 engine and the problems facing Airbus A380.
Rolls Royce and GE earnings
Early this month, Rolls Royce sharesdeclined after the company reported a relatively weak quarter. Now, the problems could get worse after GE delivered one of its worst quarters in decades. The company made a loss of 15 cents a share while its revenue fell by 24%. Interestingly, total orders declined by 38% to $13 billion while its power business fell by 11% to $4.16 billion. As a result, GE shares dropped by more than 4%.
GE was not the only company in trouble. In a statement, Boeing announced that it made a $2.4 billion loss in the second quarter. Interestingly, its commercial aircraft unit declined by 65% in the quarter. Also, order cancellations have risen. The same crisis is happening at Airbus.
So, is Rolls Royce share price cheap enough to buy?
Rolls Royce share price analysis
The 5-year chart shows that Rolls Royce share price has been in trouble after peaking at 1103p in July 2018. The shares are now below the 50-day and 100-day exponential moving averages. Also, the stock has been in consolidation in the past few days.
As a result, I cannot see any bullish pattern that is emerging in the chart, meaning that the stock could continue to fall. However, a move above 431p could reinvigorate the stock because it will send a signal that there are more bulls in the market.