Rolls-Royce and BAE Systems: Are these stocks good bets at present?

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 Rolls-Royce and BAE Systems: Are these stocks good bets at present?
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Highlights 

  • Rolls-Royce shares have been plunging lately due to the Russia-Ukraine war. The company has recently abandoned its operations in Russia.
  • Rolls-Royce aircraft engines would also be used in the B-52 Stratofortress of the US Air Force, as per recent reports.
  • UK-based aerospace company BAE Systems has delivered a solid performance in 2021.

UK-based globally operating aerospace and defence firm Rolls-Royce Holdings plc (LON: RR.), has been in news lately for a lot of reasons. Its share prices have plunged since 24 February due to the escalation of the Russia-Ukraine crisis. Recently, the jet engine maker announced that it would abandon its operations in Russia. The Russian commercial airline Aeroflot would not get any products or services from Rolls-Royce as a measure of retaliation, however, Russia doesn’t even account for 2% of the total revenues that Rolls-Royce earns globally. 

 Rolls-Royce and BAE Systems: Are these stocks good bets

2022 Kalkine Media®

Rolls-Royce is currently working on the research and development of the world’s biggest engine. The fuel consumption in this UltraFan engine would be 25% less than the first generation of the company’s Trent engines. Rolls-Royce aircraft engines would also be used in the B-52 Stratofortress of the US Air Force, as per recent reports. An electric airplane innovated by the company has recently broken the world record and has become the fastest all-electric aircraft made as of now, as per the world air sports federation (FAI).

According to a recent report by Reuters, the UK government has also recently demanded the country’s nuclear regulator to approve the nuclear reactor of Rolls-Royce as the small-scale reactor would potentially help the country to move away from fossil fuels towards a decarbonised economy.

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Should you invest in Rolls-Royce shares?

On 24 February 2022, Rolls-Royce had released its annual result for 2021. After recovering from losses made in 2020 due to the pandemic, the company made an underlying operating profit of £414 million in 2021. The statutory earnings per share (EPS) of the company stood at 1.48p per share in 2021, and the EPS is expected to reach 4.5p per share this year, further increasing up to 6.5p per share in 2023. The growth potential of the company seems positive, and it aims to provide sustainable returns to its investors in the long run.

Rolls-Royce may be considered as a good investment option for investors as it is focused on not just Civil Aerospace but also on defence, power systems, and other such businesses. The operations of the company are diversified, and its prospects appear to be bright. However, there are a lot of criteria investors should consider before investing in Rolls-Royce stocks, and thus thorough research is recommended on investors’ end.

Rolls-Royce and BAE Systems: Are these stocks good bets

2022 Kalkine Media®

Rolls-Royce’s share price performance

The market cap of the FTSE100-listed firm, Rolls-Royce Holdings Plc, stands at £7,897.34 million as of 17 March 2022. Rolls-Royce Holdings Plc’s shares closed at GBX 94.18, down by 0.21%, on 17 March 2022.

The company’s performance has gone down lately and its return on both one-year and year-to-date parameters are negative, standing at -25.96% and -23.36%, respectively, as of 17 March.

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Rolls-Royce vs. BAE Systems

BAE Systems Plc (LON: BA) is also a UK-based aerospace company like Rolls-Royce. It is also a constituent of the FTSE 100 index and has recently released its results for 2021 on the same day as Rolls-Royce. As per its results, its operating profit has gone up from £1,930 million in 2020 to £2,389 million in 2021. Its basic EPS has also increased from 40.7p to 55.2p in 2021. The total revenues generated by BAE also went up from £0.2 billion to £19.5 billion in 2021, which was a remarkable increase.

The operations of the company are diversified, and it works through a range of segments, which include cyber & intelligence, electronic systems, platforms, and services (US), air, and maritime. The company has delivered a solid performance last year, and its one-year return and year-to-date returns as of 17 March 2022 stand at 43.91% and 31.14%, respectively.

The market cap of BAE Systems stands at £22,195.61 million and its shares were trading at GBX 723.40, up by 2.46%, on 17 March 2022.

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