MARKET REPORT: Rolls-Royce shares rally as jet engine-maker’s turnaround plan gets the thumbs up from investors

Rolls-Royce shares rose as the jet engine maker’s turnaround plan received a wave of support from the City.

Analysts said last week’s strong set of results were driven by a recovery in long-haul flying, rising global defence spending and price increases on its products and services. 

As a result, JP Morgan upgraded its rating on the stock to ‘neutral’ from ‘underweight’ and hiked the target price to 235p from 90p.

Bernstein also lifted the target price to 220p from 168p.

Shares, which have more than doubled so far this year, revved higher by 1.5 per cent, or 3p, to 209.5p.

On a roll: Rolls Royce shares, which have more than doubled so far this year, revved higher by 1.5%, or 3p, to 209.5p

JP Morgan said Rolls has significantly beaten expectations in two consecutive set of results.

The investment bank also highlighted comments from chief executive Tufan Erginbilgic, who told investors in February that Rolls was failing to charge enough for its products.

JP Morgan said the company’s pricing on its servicing agreements had been far too low for it to generate good returns. 

Bernstein echoed a similar sentiment, citing improved profitability in the group’s civil aerospace division. I

t also said that attention will now turn towards the end of November, when the group is expected to set out its medium-term targets.

The FTSE 100 fell 0.13 per cent, or 9.88 points, to 7554.49 and the FTSE 250 dropped 0.39 per cent, or 72.95 points, to 18861.67, carrying on from last week’s heavy losses.

Housebuilders wobbled after data from Halifax showed house prices, which slid 2.4 per cent in July, fell for a fourth month in a row.

Stock Watch – Card Factory

Card Factory shares soared after the group defied a weak economic backdrop to see trading surpass forecasts during the first half of the year.

The greetings card and gifts company told investors it anticipates its annual performance to be ‘materially ahead’ of prior expectations.

A May update saw the firm reveal that sales in the first weeks of the current fiscal year had been ‘encouraging’ across its everyday and seasonal ranges. 

Shares rose 16.2 per cent, or 14.4p, to 103.2p.

Taylor Wimpey retreated 0.6 per cent, or 0.65p, to 118.35p, Berkeley Group lost 0.5 per cent, or 23p, to 4288p and Persimmon shed 0.4 per cent, or 4.5p, to 1142.5p.

Shipping broker Clarkson sank into the red after it flagged currency headwinds and a softening rate environment in the rest of 2023. 

The outlook came after group revenue rose by a fifth to £321.1million in the six months to the end of June while profit was up 24 per cent to £52.2million. Shares slid 4 per cent, or 115p, to 2755p.

One of the UK’s biggest estate agency groups issued a profit warning amid ongoing turmoil in mortgage markets.

LSL Property Services said the Bank of England’s larger than expected interest rate hike in June resulted in reduced levels of purchase and remortgage activity.

As a result, profit for the final six months of 2023 is likely to be below its previous forecasts. Shares sank 10.6 per cent, or 30p, to 252p.

There was mixed fortunes for UK life insurers as Deutsche Bank Research cut their target prices.

The broker also issued a note of caution over the industry’s underperformance, which it said was down to accounting regime changes and a potentially long wait for most companies to provide updates on strategy and capital management.

M&G managed to add 0.1 per cent, or 0.1p, to 198.2p and L&G gained 0.2 per cent, or 0.5p, to 228.8p, but Phoenix lost 0.2 per cent, or 1.2p, to 539.8p and Aviva inched down 0.1 per cent, or 0.2p, to 384.5p.

Capita came under further pressure as investment bank Citigroup nearly halved its target price on the Government contractor’s stock. 

The downgrade came after the FTSE 250 group on Friday posted a loss of almost £68million for the first half of 2023 and said it was bracing to take a financial hit of up to £25million following a cyber-attack that began in March.

Shares dropped 7.3 per cent, or 1.6p, to 20.34p.

Unite Group fell 1.6 per cent, or 15.5p, to 947.5p after brokers at RBC cut its rating on the student accommodation provider’s stock to ‘sector perform’ from ‘outperform’ but maintained a target price of 1100p.

This post first appeared on Dailymail.co.uk