RYCEY - Sequoia Fund - Rolls-Royce:  Likely To Generate Half Current Market Cap As FCF Over Next 4 Years

2024-03-22 12:25:00 ET

Summary

• Shares in Rolls Royce surged last year, generating a nearly 240% return in the year.
• The last few years have been tough ones for Rolls and this makes the company's strong results last year less impressive.
• RYCETY is likely to generate free cash flow over the next four years amounting to upwards of half its current market capitalization.

The following segment was excerpted from this fund letter.

Rolls-Royce ( RYCEY )

Shares in Rolls Royce surged last year, generating a nearly 240% return in the year. High-level financial results were excellent compared to the prior year. For 2023, we expect revenues to be up in the high teens and operating income to have almost tripled to £1.3 billion. Free cash flow should total about £1 billion, versus negative £300 million in 2022. As always, perspective is important. The last few years have been tough ones for Rolls. On the one hand, this makes the company's strong results last year less impressive. On the other hand, this helps explain why we are comfortable with our position even after the shares more than tripled....

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