Jefferies hikes target for Rolls-Royce, sees upside to medium-term targets for free cash flow

Analysts at Jefferies hiked their target price on shares of Rolls-Royce, pointing to its most recent trading update, which they said implied the potential for positive surprises as regarded the engineer's free cash flow guidance.

So much so that they expected the engineer would be able to hit its 2027 FCF guidance one year ahead of plan thanks to improved civil After Market margins.

They also noted the upcoming key catalysts for the share price in the form of the Farnborough airshow between 22-28 July and the company's first half results on 1 August.

All told, they raised their target price for the shares from 530.0p to 580.0p, on the back of 4-9% upgrades to their estimates for Rolls's earnings per share.

Their recommendation was kept at 'buy'.

They also said that cash returns were "nearing". Hence,, they also raised their valuation multiples closer to their 'bull' case.

Those multiple were 19 times for Civil, a 5% free cash flow yield, against 17 times and 5.5% previously.