Broker snap: Rolls-Royce deserves premium rating after strong H1, says Investec

25th Jul 2013 10:32

Investec has maintained its 'buy' rating and 1,350p target price for Rolls-Royce following the engine maker's better-than-expected first-half results on Thursday.The broker said that the company has produced "another solid set of interim results, slightly ahead of consensus revenue and profit forecasts".Revenues of £7.3bn, up 27% year-on-year, came in 1.0-2.0% ahead of revenue estimates, while adjusted earnings per share of 33.33p (also up 27%) beat forecasts by 8.0%. Investec had expected figures closer to £7.07bn and 30.35p, respectively.The broker said that the key highlights included an improvement in profitability at Civil Aerospace and a strong performance in Marine, in addition to a 15% increase in the backlog to £69bn."RR has been one of the best performers in the sector year to date (+36%) and on an FY14E price-to-earnings of 16.1x, is the highest rated global aerospace and defence company on this measure," said analyst Andrew Gollan."We continue to believe that a premium rating is fully justified by long-term growth and cash improvement as momentum in the Civil Aerospace segment increases."The stock was up 3.73% at 1,224p by 10:26 on Thursday.BC