Rolls Royce (LON: RR) (OTCPK: RYCEF) shares are down 1% this morning. RR shares fell on the announcement of the half year results. Which were very good results, excellent in fact given the performance of the past few years. But if results are excellent then why do the shares fall? Well, there is this old stock market adage, buy the rumour, sell the fact. Something we can see right here in the performance of RR shares recently.
Back only a week or so we have a guidance update from Rolls Royce: “Rolls Royce (LON: RR) (OTCPK: RYCEF) shares have jumped 21% in London this morning. RR jumped on the back of their updated numbers. The assumption is being made that Rolls Royce is finally back. Which, after the tribulations of the past few years would be a welcome change of course. There are two specific parts to the new numbers: “Strong first half results helped by transformation: For the first half of 2023, we now expect underlying operating profit of £660m-£680m. This performance reflects continued revenue growth across all three main divisions coupled with early transformation benefits, notably commercial optimisation, cost efficiencies and focused investment across the Group.” This is a trading update so that's a forecast - but a pretty accurate one - of how they expect that first half set of results to turn out. “
Rumour is perhaps a bit too weak to describe a trading update a week before the results come out but the principle is already established. The rise in the share price came on the news that results would be good. Which leaves us with today’s reaction to the actual results - Hunh, only that good, eh?
Rolls Royce share price from Google Finance
Those Rolls Royce results are indeed good: “Significantly improved first half results: higher underlying operating profit of £673m and free cash flow of £356m reflects continued end-market growth and our focus on commercial optimisation and cost efficiencies across the Group Full year guidance raised: on 26 July we upgraded 2023 guidance for underlying operating profit to £1.2bn-£1.4bn and free cash flow to £0.9bn-£1.0bn; transformation efforts are accelerating our financial delivery” All excellent in fact. But we already knew all of that. So, the information is already in the share price.
It’s obviously not a perfect description of a stock market but it’s a pretty good one - a Nobel has been awarded for noting it for example. The current share price includes all the information we know about a share. It’s only new information that will change it. Given the way the Rolls Royce results were telegraphed there’s little new in these half year results. So, little price change.