Rolls-Royce share price hits turbulence as focus shifts to Feb 22nd

Rolls-Royce (LON: RR) share price has pulled back sharply in the past few days as attention shifts to February 22nd when the company will publish its financial results. After peaking at 325.3p, the stock has retreated to almost 300p, making it one of the top FTSE 100 laggards of this year. 

Rolls Royce Holdings stock price has come under intense pressure and is in the same place where it was when the year started. This performance is a strong reversal considering that it has been a bright shining star in the FTSE 100 index in the past few years.

The next important Rolls-Royce news will come on February 22nd when the manufacturing company publishes its financial results. Based on the recent statement by the management, analysts expect the results to show that the company had a strong year in 2023.

Besides, its three primary divisions like civil aviation, defense, and power did well. In civil aviation, airlines recovered fully from the pandemic closures leading to more flight hours. There have also been strong order flows for wide-body engines. 

Meanwhile, the ongoing war in Ukraine and tensions between Western countries and China have led to an increase in defense spending. Donald Trump’s assertion that he will not support NATO will lead to an increase in spending. This is important because Rolls-Royce is one of the biggest defense contractor in the UK.

Analysts expect that the company’s growth will continue in the coming years. Its underlying sales are expected to come in at £14.7 billion followed by £16 billion this year and £17 billion in 2026. Its underlying profit before tax is expected to jump from £1.09 billion in 2023 to £1.82 billion. 

Most importantly, Rolls-Royce’s free cash flow (FCF) is expected to increase from £1.01 billion in 2023 to £2.13 billion in 2025. Therefore, a beat in the upcoming results will likely help to solve the recent stock retreat.

A closer look at the daily chart shows that the RR stock price has retreated in the past few days. It has now settled at an important level since this price is along the lower side of the ascending channel. It is also slightly above the 50-day Exponential Moving Average (EMA), which is a positive sign. 

Another drop on Wednesday will mean that the stock has formed a three black crows pattern, which is a popular bearish sign in the market. It will also signal that there are more sellers in the market, meaning that the stock has more downside.

The alternative scenario is where the Rolls-Royce share price rebounds and retests the upper side of the channel at 325p.

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