Broker snap: Evolution keeps buy rating on Rolls-Royce

13th Oct 2011 11:11

Evolution Securities has maintained its buy rating on Rolls-Royce following the firm's latest disposal and partnership with Pratt & Whitney.The global power systems group announced late Wednesday night that it is selling its 32.5% stake in International Aero Engines (IAE) - the business which produces the V2500 engine for the A320 Airbus - to Pratt & Whitney for $1.5bn, in addition to further payments for every hour IAE engines are flown over the next 15 years. Furthermore, the company unveiled a new partnership with Pratt & Whitney to power future mid-size aircraft which hold between 120 and 230 passengers.While the $1.5bn in cash will be retained for general corporate purposes, the flight-hour payments will add more than £140m to operating profits at the Civil Aerospace division. "This is a 28% increase on our forecast for the division's 2011 operating profit and a 12% increase on our group expectations," said Evolution analyst Guy Brown. "This deal appears to accelerate the profit recognition of the aftermarket value of 4,500 engines in service and 2,000 on order. RR are currently focused on more than doubling deliveries of the high thrust Trent engines and integrating the €3.4bn acquisition of Tognum. This deal helps drive profit delivery and we reiterate our buy recommendation," Brown said.The broker says that its numbers are put under review for the time being.By 10:31, Rolls' shares were up 6.5% to 666.5pBC