Rolls-Royce Share Price Popped After Earnings – Still a Buy?

The Rolls-Royce (RR) share price popped by more than 3.50% after the latest earnings. The RR stock rose to a high of 108p, becoming the best performer in the FTSE 100. It has risen by more than 25% from the lowest level in July. 

Rolls Royce Holdings earnings

Rolls-Royce had a good quarter as the aviation industry rebounded and costs reduced. The company managed a profit of more than 307 million pounds in the first six months of the year. That compared with a giant 1.6 million pounds loss in the same period in 2020.

The company also managed to boost its liquidity in the first half of the year by selling assets and cutting costs. This means that it has no maturities until 2024. It also expects to be cash-flow positive in the second half of the year. Its revenue came in at more than 5.15 billion pounds. In a note, the firm’s CEO said:

This leaner cost base together with a strong liquidity position gives us confidence in our ability to withstand uncertainties around the pace of recovery in international travel and benefit from the eventual rebound.”

The strong Rolls-Royce earnings were easy to predict. As I wrote two weeks ago, General Electric, its main competitor also a strong second quarter. Also, recent results by firms like United Airways, IAG, and Delta showed that there have been strong demand for flying. This is notable since the company makes most of its money when people fly more.

The Rolls-Royce share price is also reacting to the decision by the company to sell its Bergen Engines business to Langley Holdings. It also sold its ITP Aero business. That sale was part of the firm’s decision to sell assets worth more than 2 billion pounds in a bid to boost its liquidity.

Rolls-Royce share price forecast

The Rolls Royce share price jumped after the firm published its results. This price action was consistent with what I predicted on Monday when I said that the shares were set to fly in August. Now, the bullish view has become more evident after these earnings. 

Turning to the four-hour chart, we see that the stock has formed a V-shaped recovery. As a result, it has risen above the short and long-term moving averages. 

Therefore, i suspect that the stock will likely keep rising. But bulls will need to move above the key resistance at 113.26p to validate the bullish view. Any move above this resistance will see the shares jump to the next key level at 120p. However, a drop below 100p will invalidate the bearish view.

Rolls-Royce share price