Investec cautious about 2016 outlook for Rolls-Royce

13th Feb 2015 11:42

Investec said that investors are likely to remain cautious about Rolls-Royce as the engine maker faces challenges across most business next year.The broker placed its 'hold' rating, 860p target price and forecasts under review for the FTSE 100 group.Rolls-Royce's annual results released Friday were broadly in line with forecasts, Investec said, with earnings beating expectations but free cash flow providing a miss.The company also providing guidance for 2015, the midpoint of which matches analysts' estimates "which should reassure", Investec said."However, following 2014, investors will likely remain cautious," the broker said."We expect focus to move rapidly to 2016 where Rolls will continue to face headwinds in most of its businesses. A continued drag on group performance by Rolls' non-aerospace businesses should serve as a catalyst for a strategic review."Investec said that the stock trades at 15.3 times earnings on 2015 estimates, falling to a multiple of 14.3 on 2016 estimates.The shares were down 0.6% at 899.66p by 11:41.