Rolls-Royce (OTCMKTS:RYCEY) Stock Makes a Big Move: Time To Buy?

There were a number of stocks that made major moves on Wednesday and one of those was the Rolls-Royce (OTCMKTS:RYCEY) stock, which ended up with gains of as much as 23% amidst heavy interest. In light of such handsome gains, it could be a good idea for investors to take a closer look at the company and the circumstances which led to the gains.

The rally in the stock came about on Wednesday after it announced that the turnaround plan that it had put in place had started to bear fruits. Hence, the company decided to raise its profit projections for the year. Naturally, that led to excitement in the markets and led to the rally.

The company, which is famous for manufacturing engines that power the biggest commercial aircraft in the world, announced yesterday that it projected underlying operating profit to in the 1.2 billion Great British Pound (GBP) to 1.4 billion GBP. In the past, the range had been between 0.8 billion GBP and 1 billion GBP. The shares touched their highest levels since March 2020 as the projections beat the analysts’ estimates of 934 million GBP.

Rolls-Royce generates a bulk of its revenues from the maintenance and servicing of engines they sell and announced yesterday that the volumes had gone up owing to the rebound in the level of international travel. Additionally, the civil and defense units also delivered cost efficiencies, which further drove up the projections.

The Chief Executive Officer of the company TufanErginbilgic launched a program of transformation at the beginning of 2023. He noted yesterday that the fact that the process was working was evident from the strength in the initial results and the higher projections for the fiscal year 2023. He went on to add that the company managed to boost its performance despite the challenges owing to supply chain issues and the positive impact was being seen in all the company’s divisions.

Investors could do well to keep an eye on the Rolls-Royce stock over the course of the coming days since it would report its financial results for the half-year next week. The company noted that the half-year profits could be in the range between 660 million GBP and 680 million GBP, which would surpass the market expectations of 328 million GBP by more than 100%.

The company is currently the beneficiary of the return of long-distance travel and that is pushing the demand for more frequent engine maintenance from various airlines. Additionally, since Erginbilgic had taken over as the company’s CEO, he had made significant changes to the senior management and that included the heads of the defense and civil units.

He also cut back spending on the company’s non-core businesses and also renegotiated the sales and maintenance contracts with its customers. The company also announced yesterday that free cash flow in the 2023 fiscal year would hit 1 billion GBP due to the early benefits of the transformation process.