United's stalled A350 order thrown into doubt by Rolls-Royce engine row | ReutersSkip to main content[Exclusive news, data and analytics for financial market professionalsLearn more aboutRefinitiv]A bird flies past an Airbus A350 aircraft performing a flypast at the Dubai Airshow in Dubai, United Arab Emirates, November 17, 2025. REUTERS/Amr Alfiky [Purchase Licensing Rights, opens new tab]- Companies- Summary- United's A350 order has faced 16 years of changes and deferrals- United in a contract fight with ...

Core Viewpoint - Investors in the Aerospace - Defense Equipment sector should consider Bae Systems PLC (BAESY) and Rolls-Royce Holdings PLC (RYCEY) to determine which stock offers better value at present [1] Group 1: Zacks Rank and Earnings Estimates - Bae Systems PLC has a Zacks Rank of 2 (Buy), while Rolls-Royce Holdings PLC has a Zacks Rank of 3 (Hold), indicating a stronger earnings outlook for BAESY [3] - The Zacks Rank system emphasizes companies with positive earnings estimate revisions, suggesting that BAESY is likely experiencing an improvement in its earnings outlook compared to RYCEY [3] Group 2: Valuation Metrics - BAESY has a forward P/E ratio of 23.07, significantly lower than RYCEY's forward P/E of 38.06, indicating that BAESY may be undervalued relative to RYCEY [5] - The PEG ratio for BAESY is 1.58, while RYCEY's PEG ratio is 2.03, suggesting that BAESY offers better value when considering expected earnings growth [5] - BAESY's P/B ratio is 5.42, compared to RYCEY's P/B of 44.48, further indicating that BAESY is more attractively valued [6] - Based on these valuation metrics, BAESY holds a Value grade of B, while RYCEY has a Value grade of D, reinforcing the view that BAESY is the preferable option for value investors [6]

Group 1 - The article does not provide any relevant content regarding the company or industry [1]

Core Insights - A significant growth driver for Rolls-Royce is its nuclear energy segment, which is benefiting from increasing demand for AI data centers and supportive policies [1] - The previous article on Rolls-Royce highlighted an 11% price dip, suggesting a potential buying opportunity [2] Company Overview - Rolls-Royce is positioned in the aviation industry and is exploring opportunities in the green economy, particularly through its nuclear energy segment [1][2] - The company is part of a broader investment theme focused on green growth, which is gaining traction among investors [2] Market Context - The nuclear energy sector is expected to see substantial growth due to favorable market conditions and technological advancements, particularly in AI [1] - The investment group "Green Growth Giants" is dedicated to identifying stocks within this high-growth sector, indicating a strategic focus on sustainable investments [1]

Core Insights - The article emphasizes the importance of equity research and fundamental analysis in determining a company's intrinsic value based on market sentiment, macroeconomic shifts, and company fundamentals [1]. Group 1: Company Analysis - The focus is on long-term value creation by companies, which provides opportunities for generating greater value for equity holders in the future [1]. - The valuation approaches discussed include a combination of bottom-up analysis, which is essential for understanding the underlying factors that drive a company's performance [1]. Group 2: Industry Engagement - Contributing to platforms like Seeking Alpha allows for interaction with professionals across diverse sectors and investment philosophies, enhancing the learning experience [1]. - The platform serves as a medium for delivering research that supports both personal growth and meaningful contributions to the investment community [1].

Core Insights - Rolls-Royce is positioning itself as a key player in providing electricity for AI data centers, particularly through its small modular reactors (SMR) business segment [1][5][11] Industry Overview - The global electricity consumption by data centers is projected to double by 2030, highlighting the increasing demand for power infrastructure in AI development [2] - Europe is emerging as a significant area for data center construction, facing similar power challenges as the United States [2][3] Company Developments - Rolls-Royce's SMR can generate up to 470 megawatts of power, equivalent to 150 onshore wind turbines, and has a lifespan of up to 60 years [6] - The company has secured partnerships with CEZ Group in the Czech Republic and Siemens for the development and deployment of SMRs [6][7] Financial Performance - In the first half of 2025, Rolls-Royce reported a 13% increase in total revenue compared to the same period in 2024, with gross profit and operating profit growing by 33% and 50% respectively [8] - The power systems business, particularly the SMR segment, saw a revenue increase of 23%, with the power generation subset growing by 26% [9][10]

Group 1 - Rolls-Royce stock has advanced 13% since the last report, indicating a positive trend in its market performance [1] - The stock did not reach the price target of $18.69, prompting an assessment of its attractiveness in the aerospace and defense sector [1] - The aerospace and defense industry is characterized by significant growth prospects, which are analyzed in the context of ongoing developments [1] Group 2 - The investing group, The Aerospace Forum, aims to discover investment opportunities within the aerospace, defense, and airline industries [1] - The analysis provided is data-informed, leveraging in-house developed data analytics to support investment theses [1]

Core Insights - Rolls-Royce (RYCEY) has experienced a strong start in 2026, with a year-to-date increase of nearly 12.9%, reaching record highs in each trading session [1][4]. Group 1: Performance and Market Context - The stock's performance significantly outpaces the broader market, with the S&P 500 only gaining 2% in the same period [4]. - The rise is attributed to a combination of operational recovery and favorable geopolitical conditions, creating a "perfect storm" for growth [5][8]. - Rolls-Royce's civil aerospace segment remains a long-term growth driver, while recent momentum in its defense business also contributes to overall growth [6]. Group 2: Strategic Developments - The company has made strides in operational efficiency, resulting in a leaner business model and a stronger balance sheet [5]. - Key developments include a £400 million strategic partnership with the UK Royal Navy and the successful completion of a £1 billion share buyback program [7]. - The company is also involved in testing its AE 1107 engine for the U.S. Army's FLRAA program, highlighting its commitment to defense contracts [6]. Group 3: Valuation Concerns - Despite strong business performance, RYCEY's stock is considered overvalued, trading at a forward P/E ratio of approximately 39.3x compared to the broader market's 23.46x [9]. - The Price-to-Earnings-to-Growth (PEG) ratio of around 2.8 indicates that the stock price is high relative to expected future earnings growth [10]. Group 4: Investment Alternatives - Instead of purchasing RYCEY directly, investors are advised to consider ETFs that include the stock, which can mitigate concentrated risk [2][12]. - Notable ETFs include: - **NATO**: Holds 6.21% of RYCEY, with a net asset value of $41.71 and a 64.8% increase over the past year [13]. - **EUAD**: Holds 18.08% of RYCEY, with net assets of $1.20 billion and a 94.9% increase over the past year [14][15]. - **WCMI**: Holds 7.88% of RYCEY, with net assets of $849.3 million and a 39.5% increase over the past year [16].

Group 1 - Defense spending has become a crucial focus amid the context of Cold War II, despite general voter unpopularity towards war [1] - The primary objective in this environment is risk management, as state actors navigate increasingly fragmented geopolitical landscapes [1]

Investment Rating - The report maintains a positive outlook on the civil aviation manufacturing industry, indicating it will become a significant growth area for China's aerospace manufacturing sector [1][5]. Core Insights - The civil aviation manufacturing sector is expected to mirror the success of the U.S. aerospace industry, where commercial aircraft manufacturing is a major source of revenue and profit for companies like Boeing and GE Aviation [2][55]. - The C919 aircraft is set to lead the development of China's civil aviation manufacturing industry, with a production capacity expected to reach 200 units per year by 2029 [3][56]. - The aftermarket for civil aviation in China is projected to be vast, with the country potentially becoming the largest single aviation market globally by 2044 [4][5]. Summary by Sections Civil Aviation Manufacturing Growth - Civil aviation manufacturing in China is anticipated to grow significantly, driven by the C919's commercial operations and the development of a domestic supply chain [1][5]. - The report highlights that the domestic aviation manufacturing industry is beginning to catch up, with a focus on increasing the localization rate of components [3][4]. C919 Aircraft Development - The C919 aircraft, with over 1,000 orders, is expected to enhance production and delivery capabilities, marking a significant milestone in China's aviation history [3][56]. - The aircraft's production model involves a high degree of localization, with over 50% of its components sourced domestically [3][56]. Aftermarket Opportunities - The civil aviation aftermarket in China is projected to expand, with an increase in the number of approved civil aviation products and components [4][5]. - The report notes that the penetration of domestic materials is expected to rise, helping airlines reduce procurement costs and improve supply chain reliability [4][5]. Investment Opportunities - The report suggests focusing on investment opportunities within the civil aviation manufacturing supply chain, including companies involved in aircraft body manufacturing, materials, engines, and onboard equipment [5]. - Key companies mentioned include AVIC Xi'an Aircraft Industry, AVIC Harbin Aircraft Industry, and various suppliers of materials and components [5].