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Rolls Royce (RR.) 432.5p

The maker of aircraft engines posted good full-year numbers last week (Thursday 7 February), with sales up 6% to £7.81 billion despite the weak dollar and increased raw material costs. Underlying pre-tax profit was £800 million, 13% up from last year, and the company said it would raise the dividend by a third. This, however, came in lower than expected and investors reacted negatively, sending the shares as much as 9.9% down to their lowest in 12 months at 432.5p. However, the company seems in good shape, with growing revenue from aircraft engines services and a focus on emerging economies. The gas turbines business is performing well too, and the company started the new financial year with a record order book. The planned job cuts and the impact of the weak dollar should be more than priced into the shares, therefore recovery is likely in the short term as investors will be attracted to buy the shares at these low levels.

ACTION: BUY Rolls Royce • Target 475p • Stop loss 406.5p

TIME TARGET: 4 WEEKS