Rolls-Royce ( LON: RR ) share price dipped by over 5% on Thursday, becoming the worst-performing FTSE 100 constituent. The stock plunged to a low of 148.30p, which was lower than the year-to-date high of 156.70.
Trading statement and AGM
Rolls-Royce Holdings published its trading statement and held its annual general meeting on Thursday. The trading statement showed that the company’s long-term service agreement large engine flying hours jumped to 83% of 2019 levels in the four months to April. It hopes that the percentage will be between 80% and 90% this year.
Further, the firm said that its civil aviation business was doing well. For one, it win the largest order of its Trent XWB-97 engines. It will supply 68 engines to Air India, one of the fastest-growing airlines in the world.
The other segments continued doing well. For example, its defence business, the company won orders to supply engines for the AUKUS submarine program. The same is true in the power system, where backlogs have continued rising. In a statement, the company’s CEO said :
“We are making good progress and our financial performance year-to-date is in line with expectations. I’d like to thank everyone at Rolls-Royce for their hard work and commitment so far. I am confident that, together, we can achieve great results.”
Why Rolls-Royce share price retreated
Therefore, there are two main reasons why the Rolls-Royce stock price crashed after its trading statement. First, it dropped because the company did not upgrade its forward guidance as most analysts were expecting. Hopes of an upgrade were because of the strong performance of the civil aviation sector.
The other reason is because of a situation known as buying the rumour and selling the news. As a result, the shares had jumped by more than 125% from the lowest level in November last year. Therefore, the stock pulled back because the guidance was already priced in.
Source: investorsobserver
