I would love to see Rolls-Royce holding stock on here (LSE:RR). Shares in the company have plunged by 60% over the past four weeks. This dramatic slump has taken shares in the engineering group down to a level not seen for 10 years.
According to the FTSE 100 company’s latest trading update, engine flying hours were down by about 40% in March. They’re expected to fall further in April. The group is paid by airlines based on how many hours its engines fly.
As a result of this, the company has suspended its dividend, has raised £1bn of new credit facilities, and could furlough up to 50% of its shop-floor workers.
Unfortunately, as it’s impossible to stay how long the coronavirus outbreak will last at this stage, it’s impossible to predict when Rolls will recover.
However, its current weakness is also its biggest strength. As noted above, the company is one of the two primary jet engine producers in the world. That’s not going to change anytime soon.
So, when the global economy re-starts, this FTSE 100 blue-chip champion should roar back into action. It could take some time for the business to recover, but the global aviation industry is only set to grow over the next five to 10 years. Rolls should be able to profit from that in the long run.
In the meantime, Rolls’ defence and power systems businesses are still ticking over. Last year, the FTSE 100 group’s defence business delivered roughly 50% of the firm’s £808m underlying operating profit.
I WANT TO SEE THIS STOCK HERE
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