Shares digital

Rolls-Royce (RR.) 412p

The engineer fought off the weak dollar and rising costs to grow profit for 2007 by 13%. (Read the full story: www.sharesmagazine.com/node/3204)

Shares says: Keep an eye on those costs. It is confident of reducing them by up to 4% this year but failure to achieve won’t be taken lightly by the City. It is also heavily exposed to any weakness in the dollar. Momentum with jet engine sales offers a small ray of hope. HOLD

The Times says: Careful stewardship of cash or gratuitous hoarding? The stock market inclined towards the latter view on learning that Rolls-Royce is returning just £40 million to shareholders this year through increased dividend payments rather than a hoped-for one-off payout of £500 million. The shares fell 10% in response. By keeping its cash, Rolls gives a pertinent, perhaps unintended, reminder that it remains a fundamentally cyclical business. SELL

The City - Evolution says: We expect earnings to pause for a few years, while the sector de-rates on lower orders, driving a decline in the share price. Given the outlook on the latest results, the process may even happen more quickly than we expected. SELL