The Rolls-Royce share price is holding steady close to its year-to-date high as investors reflect on the recovering aviation industry. The RR stock is trading at 142p, which is a few points below the YTD high of 150p.
Aviation industry rebound
Rolls-Royce Holdings makes most of its money in the civil aviation industry. It does this by selling engines to companies like Boeing and Airbus and then entering long-term service contracts with airlines like Lufthansa, British Airways, and Emirates. The servicing business is its biggest cash earner.
Therefore, the Rolls-Royce share price has rebounded in the past few weeks as companies announce plans to restart their foreign trips. In the past few weeks, Lufthansa has restarted its trips to the United States.
Similarly, Qantas has restarted some of its long haul trips. British Airways, which is owned by IAG, has also announced plans to start flying to the United States.
Therefore, there is a likelihood that Rolls-Royce will do better in the second half of the year than it did in the first half when it eked a profit.
There are other reasons why the Rolls-Royce share price is rising. First, the company will benefit from the latest AUKUS deal between the US, UK, and France. The deal will see these countries develop nuclear submarines for Australia. Rolls-Royce has a big business of developing such engines.
Second, the company will benefit from the recent $2.8 billion deal to develop engines for the B52 fighter jets. The company beat out other rivals like Pratt and Whitney and General Electric. Third, the stock has risen after the company sold a key division to Bain, a private equity company. The ITP Aero divestiture was part of the company to raise $2 billion through asset sales.
Rolls-Royce share price forecast
The four-hour chart shows that the RR share price has done what is known as a break and retest pattern. We see that the shares rose above the key resistance at 134p in September. It then retested the level recently, which is a bullish factor. The stock is also being supported by the 25-day and 15-day moving averages.
Therefore, the RR share price will likely keep rising in the near term as investors target the next key resistance levels at 150p. On the flip side, a drop below 134p will invalidate the bullish thesis.