Broker snap: Another 'tick-in-the-box update' from Rolls-Royce

9th Nov 2012 10:41

Investec has retained its 'buy' rating and 930p target price for power systems group Rolls-Royce after the company's in-line third-quarter statement on Friday.The broker labelled today's trading update as "typically brief" but confirming full-year guidance for good growth in underlying revenues and profit, as well as break-even cash."So another 'tick-in-the-box update' that is unlikely to materially move the shares," Investec said.One change from the half-year outlook was that full-year Marine revenues are now expected to be flat on last year, compared with guidance of a "modest increase". However, the broker said that this suggests that margins are slightly better than expected given that guidance at the group level is unchanged.Investec continues to forecast a full-year profit before tax of £1,423m and earnings per share of 58.7p."FY cash flow is expected to be breakeven following the outflow in H1. This reflects a profile of continuing investment in capacity and technology ahead of the significant industrial ramp in Trent engines over the next few years," the broker said.While the shares trade on a "relatively expensive" 13.4 times next year's earnings, the broker remains upbeat given the strong balance sheet.Investec said: "We remain buyers of the long-term growth story as the group looks forward to executing a very significant ramp-up in civil engine production over the coming years (hence high current investment."Shares were up 0.58% at 866p in mid-morning trade.BC