August 30, 2019. Zhukovsky, Russia. Aircraft engine Rolls-Royce Trent XWB long-range wide-body twin-engine passenger aircraft Airbus A350-900 XWB Airbus Industrie at the International Aviation and Space Salon MAKS 2019.
The Rolls-Royce share price bullish momentum continued this week after the company landed a multi-billion dollar contract by the American government. The RR stock rose to a high of 150 pence on Monday, the highest level since 2020.
Rolls-Royce doing well
Rolls-Royce Holdings has been in the headlines recently for several reasons. First, the company is expected to be a key beneficiary of the recently announced deal between the UK, US, and Australia.
The deal will see the former two countries build 12 nuclear-powered submarines for billions of dollars. The contract to build the submarines was first awarded to Naval Group, a French company.
Second, this week, the company bagged a new order from the American government to supply engines for the B-52 bombers. The total cost of the project will be more than $2.6 billion. By winning the contract, the company beat other American firms like Pratt & Whitney and General Electric. These engines will be manufactured at the company’s plant in Indianapolis.
Third, the company finalized the 1.5 billion euro sale of its ITP Aero business to Bain Capital. The firm will use the funds to shore its balance sheet. The sale was part of the company’s CEO to sell several of its non-core assets.
Meanwhile, the aviation industry is expected to recover at a relatively faster rate than expected as more people get vaccinated. Most developed countries have already vaccinated as much as 70% of their total population. In a statement today, Boeing said that the aviation sector will go to its pre-pandemic level in the next few years.
Still, the rising crude oil prices are a major threat for the aviation sector. That’s because aviation companies could be forced to boost prices to cover their energy costs. Besides, fuel is usually the biggest cost of aviation companies.
Rolls-Royce share price forecast
The daily chart shows that the RR share price managed to move above a key resistance level this week. As it popped on Monday, it rose above 128p, which was the highest level since March.
This is a sign that bulls are currently in the driver’s seat. It is also in line with my last week’s prediction that the share price was about to fly.
The stock has risen above the 25-day and 50-day moving averages while the MACD has moved above the neutral level.
Therefore, the stock will likely continue rising, with the next key level to watch being at 160p. However, a break and retest pattern where the stock retest the support at 130p is possible.