Broker snap: UBS upgrades Rolls-Royce to neutral

8th Aug 2011 11:04

UBS has upgraded power systems giant Rolls-Royce from sell to neutral following the recent decline in the share price.However, the broker warned that risks remain for offshore engineers (OE): "Despite recent orders (most of which are for delivery post-2012), we continue to believe that there is a significant risk to Offshore OE production next year because of lack or orders and 12-18 month lead-time.""We also believe that this risk is now understood by the market (at least the buy-side, even if it is still not reflected in sell-side forecasts)," the broker added.UBS also thinks that the civil aerospace model ("with a relatively modern fleet and increasing fleet size") should mean that Rolls-Royce's profitability will be relatively resilient to global economic worries: "on this basis, we believe that a sell recommendation is not appropriate."The target price stays at 590p.Shares fell 0.5% to 564p at 10.44am on Monday.BC