Rolls-Royce share price struggles ahead of first-half earnings

When does Rolls-Royce report earnings?

Rolls-Royce issues its first-half (H1) update on 27 August.

Rolls-Royce earnings – what to expect?

Revenue is expected to fall by 23% to £5.6 billion, while a pre-tax loss of £456 million is forecast, compared to last year’s £93 million.

Investors in Rolls-Royce go into H1 earnings knowing that its US peers General Electric (GE) and Boeing have had a tough few months. Air travel has been cut dramatically, and demand is unlikely to revive for the foreseeable future. Even before this, Rolls-Royce had been in trouble, facing problems with key engines and causing its shares to under-perform the FTSE 100.

At present, the firm looks to take the option of cutting costs in order to save cash, although a capital raising is not out of the question. Further disposals will also help strengthen the balance sheet, while it also has support available from the UK government.

It will be a long-haul recovery, but Rolls-Royce is not done for yet. And if airline travel does rebound quicker than expected then the group may find that demand picks up earlier than forecast as well.

How to trade Rolls-Royce’s earnings

Of the ten analysts covering the shares, four rate them a ‘buy’, versus three ‘holds’ and three ‘sells’. Volatility in the shares has declined significantly since March, with a current 14-day average true range (ATR) of 13.8, or 4%, compared to the 13% of mid-March.

Rolls-Royce shares – technical analysis

Aside from a brief dip in late July, the shares seem to have found a floor at 250p, with repeated dips into this level finding buyers. But gains have also been limited, with rallies towards the 50-day simple moving average (SMA) running out of momentum. The overall move lower continues, but bears will want to push the price below 240p to open the way to much more significant downside.

Rolls-Royce faces tough times

Rolls-Royce faces major challenges, and neither the fundamental nor the technical outlook provide much cause for optimism. At 16 times earnings, the shares look too expensive given the very uncertain outlook.