Rolls-Royce Back On ‘Steady Footing’ As Wall Street Lifts Targets Following Strong Aerospace And Defence Momentum

• Morgan Stanley and RBC boosted their targets after Rolls-Royce reaffirmed guidance and reported strengthening engine demand.
• Civil Aerospace, Defence and Power Systems continued to show momentum, supported by major large-engine orders and rising flying hours.
• Retail traders pointed to nuclear and aviation catalysts, with some projecting further upside for the stock.

Rolls-Royce received fresh backing from Wall Street as Morgan Stanley lifted its price target and RBC Capital initiated coverage on the stock, reinforcing the improving sentiment toward the engine maker after it reaffirmed its 2025 guidance and strengthened demand across key aerospace and defense segments.

Morgan Stanley And RBC Turn Bullish

Morgan Stanley raised its price target on Rolls-Royce to €1,280 from €1,275 and kept an 'Overweight' rating on the shares.

The upbeat call came alongside a new note from RBC Capital, which initiated coverage with an 'Outperform' rating and a £12.75 price target. RBC cited improved performance under the current management team and said Rolls-Royce is now on “steady footing” following its multi-year turnaround, according to a report by Investing. 

RBC noted that the company’s widebody civil engine portfolio could account for roughly 70% of its market capitalization, despite representing only about 37% of sales, and highlighted additional upside tied to the Ultrafan program and small modular reactor (SMR) opportunities. The brokerage also pointed to Rolls-Royce’s projected 4.4% free cash flow yield for 2026, compared with a peer average of 3.2%.

Guidance Reaffirmed Amid Strong Operating Momentum

Rolls-Royce’s latest analyst upgrades come after the company reassured on its full-year 2025 outlook, even as global supply chain pressures mount.

The company kept its full-year 2025 guidance unchanged for the underlying operating profit of £3.1 billion to £3.2 billion and for free cash flow of £3 billion to £3.1 billion. 

Civil Aerospace Demand Improves

Rolls-Royce said last week that large-engine orders from IndiGo, Malaysia Airlines and Avolon helped drive strong Civil Aerospace demand. Commitments also increased for the Trent XWB-97–powered Airbus A350F, with new orders from Air China Cargo and Korean Air. Large engine flying hours rose 8% year over year to 109% of 2019 levels, and the company said durability upgrades for the Trent 1000 and Trent 7000 remain on track for certification by the end of 2025.

Defence Segment Sees Strong Activity

The Defence division reported continued momentum through the Global Combat Air Programme (GCAP) and the UK’s agreement to export 20 Eurofighter Typhoons to Turkiye, powered by EJ200 engines. Rolls-Royce also said Project Pele, the U.S. transportable microreactor initiative, remains on schedule as part of its expanding U.S. nuclear work.

Power Systems Benefits From Data-Centre Demand

Power Systems saw further order growth from data-centre and government customers. Rolls-Royce said its next-generation, high-efficiency engine remains on track for 2028 entry into service. The company also completed testing of the first 100% methanol high-speed marine engine and introduced a fast-start gas generator for data centres due in 2026.

Berenberg Upgrade

Before the latest round of guidance updates, Berenberg upgraded Rolls-Royce to 'Hold' from 'Sell' in October, assigning a price target of £ 10.80.

Stocktwits Users Eye Big Upside

On Stocktwits, retail sentiment for Rolls-Royce was ‘extremely bullish’ amid ‘extremely high’ message volume.

One user said, “with all the nuclear power needed and aviation. This is a $50 stock,” while another urged traders to “buy before $20.”

Rolls-Royce’s U.S.-listed stock has more than doubled so far in 2025.

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