Broker snap: Rolls-Royce is a 'fundamental and technical play', says Prime Markets

14th Feb 2013 15:18

Prime Markets has labelled power systems giant Rolls-Royce as a 'buy' following the firm's full-year results, saying that the stock is a 'fundamental and technical play'.Rolls-Royce announced on Thursday morning that full-year underlying pre-tax profit rose 24% from £1,157m to £1,429m on underlying revenues that increased 8.0% from £11,277m to £12,209m.The shares, which started the day's session in the red, picked up in afternoon trade and were up 3.2% at 1,016p by 15:24, bringing the year-to-date rise to over 15%. Prime Markets pointed out that the shares have remained in a steadily rising trend channel for the past year - jumping around 29% over the last 12 months. Furthermore, since the start of 2013, they have traded above all major moving averages, "which, due to the exceptionally strong technical picture, are within 10% of each other."This recent strong performance led Investec to cut its rating for the stock from 'buy' to 'add' this morning. The broker said that while Rolls-Royce remains a "long-term 'buy'", the shares "could pause near term".However, Prime Markets' head of dealing Richard Curr argued that there still could be further upside. "Technically, it can be argued that Rolls Royce has one of the strongest charting configurations of any FTSE100 company, with the shares in an uninterrupted rising trend channel throughout the last year. And for good reason too: solid revenue growth, but more importantly [reported] pre-tax profits have more than doubled and Rolls expects growth to continue in the new year," he said."With the order book showing a healthy premium over last year, in the view of Prime Markets there is little to prevent shares in the aero engineer accelerating higher. We buy Rolls Royce with a short-term target of 1,020p, but we fully expect continued progress once the shares reach that level."BC