Rolls-Royce, the British aerospace and defense company, experienced a significant downgrade by Citi, leading to a 20% drop in its stock value. The downgrade was influenced by several factors, including a reassessment of the company’s future earnings potential and market conditions. Citi analysts cited concerns over the sustainability of Rolls-Royce’s recent profit surge, which was largely driven by a post-COVID travel rebound. They now project a more conservative growth outlook, expecting only a 12% increase in underlying profits for the next year, down from previous estimates. This adjustment reflects broader industry challenges, such as supply chain disruptions and rising costs. Despite these setbacks, Rolls-Royce maintains a strong order book, with over 1,000 engines on order, signaling some resilience in its core business. However, the downgrade has sparked investor caution, with the stock price reflecting the lowered expectations.
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