Rolls-Royce recent strength continues after JPMorgan upgrade By Investing.com

By Samuel Indyk

Investing.com – Rolls-Royce (LON:RR) shares have jumped for the sixth consecutive day, this time rallying after an upgrade at JPMorgan from ‘underweight’ to ‘neutral’.

“Whilst international airline capacity is still down circa 75% versus 2019, it is unlikely to get worse and so the direction of travel will most probably be one of slow improvement,” analysts at JPM said in a research note. “Rolls-Royce’s shares have significantly underperformed peers since 2018 and this is attracting investors.”

Financial Results

The jet engine manufacturer reported earnings on Thursday last week and provided an upbeat outlook, despite the struggles currently impacting the aviation sector.

“The worst is now well behind us,” Rolls-Royce CEO Trevor East said in the analyst call post earnings. The company maintained its forecast for large engine flying hours to increase to 55% of 2019 levels in 2021, from 43% last year.

The company is reliant on an effective global vaccination effort but the recent suspension of the AstraZeneca PLC (LON:AZN) (NASDAQ:AZN) jab in various European countries could set Europe further behind, especially if it damages confidence in the vaccine. Nevertheless, today the European Commission announced plans for digital certificates that would prove their holders have been vaccinated or have recently tested negative, which should facilitate leisure trips within the EU and from those outside the bloc. 

At 12:40, Rolls-Royce shares were at the top of the FTSE 100, trading higher by 3.6% at 127.30p. Of note, JPM also lifted its price target on the shares to 105p from 45p.