Rolls-Royce Share Price: GE Spin-Off Could Force RR to Act

The Rolls-Royce share price tilted upwards on Tuesday after Larry Culp announced that he will break General Electric. The RR share price is trading at 146.8, which is a few points below its year-to-date high. The stock has jumped by about 70% from its lowest level this year.

What happened? Rolls-Royce and General Electric are relatively similar companies. The two companies have the biggest market share in jet engine manufacturing industry. Indeed, their engines are used by almost all airlines in the world.

The two firms are also leading players in the power industry. They manufacture engines that are used in both clean and renewable energy solutions like wind and hydro. At the same time, they are major military contractors.

The only difference between the two companies is that GE has a large healthcare business. This is a business that manufactures some of the most important machines that are used in most hospitals. They include MRI machines, ultrasound equipment, and imaging solutions among others. 

In a surprise announcement that caused shockwaves globally, GE’s CEO, Larry Culp said that the company will break itself into three. These divisions will focus on aviation, healthcare, and power.

Therefore, the Rolls-Royce share price rose because analysts believe that the company could also be broken down. Indeed, a few months ago, an activist investor in the company recommended that it should break itself into aviation and power business. 

By so doing, the company will be seen as a leading aviation and military contractor. At the time, Rolls-Royce management said that the decision will not be possible. However, with GE following this route, there is a likelihood that Rolls-Royce will also do the same.

Rolls-Royce share price forecast

The daily chart shows that the Rolls-Royce share price is breaking out. The stock has already moved above its highest level this year. The stock is also moving above the key resistance at 147p and the 25-day and 50-day moving averages. The RSI has also moved above the overbought level. 

Therefore, there is a likelihood that the stock will keep rising as investors anticipate a potential restructuring of the company If this happens, the next key level to watch will be at 160p. This prediction is in line with my previous RR share price forecast.

Rolls-Royce share price