Rolls Royce share price continues on its ascent this Monday, as the company’s investors appear pleased with the cost-cutting and diversification plans of the company. Rolls Royce is looking to offload its Spanish ITP Aero unit for $1.9 billion to raise cash further after the pandemic-induced travel limitations crippled its civil aviation division.
The company was able to post a profit of 307 million pounds in the first half of 2021, recovering from a staggering loss of 1.63 billion pounds it sustained in 2020 at the height of the pandemic. The company’s forward guidance remains steadfast, with a projected cash flow target of 2 billion pounds, despite a slowdown in flying hours to 43% of the pre-pandemic levels.
The pay structure for Rolls Royce’s engines in civil aviation is based on the number of hours flown by aircraft they power. In essence, no flying means no income from the aviation unit. This is why investors are particularly pleased with the company’s diversification and asset sales, which have kept the company afloat.
Rolls Royce share price is up 2.64%, putting it at number 5 on the gainers’ list of the FTSE 100.
Rolls Royce Share Price Prediction
The breakout from the bullish pennant is facing some resistance at the 113.70 barrier (9 April/10 June highs). This barrier needs to give way for the Rolls Royce share price to have clear skies to achieve the measured move to 122.30. This move also has to take out a resistance barrier at 118.26.
If the price fails to break past 113.70 and a pullback below 108.00 (23 June/17 August lows) occurs, we could see a further dip towards 103.64. This move would invalidate the bullish pennant.