Rolls-Royce Holdings Plc RYCEY recently revealed that it is investing $75 million to expand its Aiken, SC facility, to boost production of the MTU Series 4000 engines. The expansion includes new in-house machining capabilities and a larger manufacturing footprint to meet surging U.S. demand for reliable, high-power backup generators.

This initiative follows a $24 million investment announced by the company last month in its Mankato, MN, facility. Post this investment, production of its MTU Series 4000 generator sets at this facility is projected to increase more than 120% by 2026. Together, these expansion plans represent RYCEY’s efforts in strengthening domestic manufacturing and supporting the fast-growing data center industry, where power resilience is critical due to rising strain on electric grids.

Notably, the MTU Series 4000 engines are central to powering critical infrastructures, including hospitals, airports, naval vessels, mining trucks and data centers.

Amid increasing energy demand across the United States, this expansion of manufacturing capacity for the MTU engines, known for their durability, efficiency, and low maintenance needs, could signal an opportune time for investors to consider adding RYCEY to their portfolios. However, before making an investment decision, one should conduct a thorough cost-benefit analysis, considering the stock’s past performance, growth prospects, valuation, and potential risks, to make an informed choice.

RYCEY Stock’s YTD Performance

Rolls-Royce's shares have surged a solid 88.8% in the year-to-date period, outperforming both the Zacks Aerospace-Defense Equipment industry’s rise of 25.7% and the broader Zacks Aerospace sector’s gain of 25.9%. It also came above the S&P 500’s return of 6.1% in the same time frame.Zacks Investment Research

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Other industry players like Leonardo DRS DRS and Curtiss-Wright Corp. CW have delivered a similar stellar performance year to date. Shares of DRS and CW have surged 47.3% and 36.5%, respectively, in the said period.

Can Rolls-Royce Maintain Its Winning Streak?

Rolls-Royce is not only a leading manufacturer of aircraft engines for commercial and military use but also a key supplier of nuclear propulsion systems for submarines and components for power generation. Its offerings include commercial marine propulsion, microgrid solutions, and energy storage systems, enabling it to serve a diverse range of industries — from aerospace and defense to clean energy.

In civil aviation, the company is well-positioned to benefit from rising global air traffic, which is driving demand for commercial jets and, in turn, aircraft engines. To gain further traction in this industry, Rolls-Royce recently completed design improvements for its Trent 1000 and Trent 7000 engines, used in the Boeing 787 Dreamliner and Airbus A330neo, respectively. These upgrades are expected to extend engine life by 30% by the end of 2025, potentially unlocking new original equipment and aftermarket contracts that would boost the Civil Aerospace division’s profits and cash flow.

Story Continues

The company’s Defence segment is also gaining traction amid rising geopolitical tensions and the resultant increased global defense spending. Rolls-Royce powers several mission-critical platforms, including military jets and submarines. In May 2025, it secured a five-year support contract from the UK Ministry of Defence for the EJ200 engine, which powers the Royal Air Force’s Typhoon aircraft. Such contract wins should strengthen long-term revenue growth for its Defence business.

In the clean energy space, Rolls-Royce is advancing its capabilities in hydrogen-powered engines, sustainable aviation fuel (SAF) and small modular reactors (SMRs). A major milestone was achieved in June 2025, when its SMR technology was selected by Great British Nuclear to build three SMR units in the UK.

The company is also expanding in energy storage. Its battery systems, key to integrating renewables into grids, are gaining popularity. In June 2025, Rolls-Royce received a repeat order for a large-scale storage system in Zeewolde, the Netherlands, highlighting growing demand for its energy storage solutions.
Together, these developments underline Rolls-Royce’s strong positioning across multiple high-growth sectors. Based on these developments, the company appears well-positioned to sustain its growth momentum in the long run.

Now let’s take a look at RYCEY’s near-term estimates to see what those reflect.

RYCEY’s Estimates

The Zacks Consensus Estimate for 2025 sales suggests year-over-year growth of 24.4%, while that for 2026 sales indicates an improvement of 8.5%.

The 2025 and 2026 bottom-line estimates also show a similar improving trend.

Moreover, the stock’s near-term annual earnings estimates have moved north over the past 60 days. This reflects that analysts are gaining confidence in RYCEY’s earnings-generating capabilities.Zacks Investment Research

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RYCEY Stock Trading at a Discount

In terms of valuation, RYCEY is currently trading at a forward 12-month earnings of 34.93X, a discount to the industry average of 49.12X. This suggests that investors will be paying a lower price than the company's expected earnings growth compared to that of its industry average.Zacks Investment Research

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Its industry peers, on the contrary, are trading at a premium to RYCEY. While DRS is trading at a forward 12-month P/E of 40.29X, CW is trading at 36.49X.

Risks to Consider Before Choosing RYCEY

The primary challenges that aerospace-defense stocks like RYCEY, CW and DRS continue to face include varying levels of supply-chain pressures stemming from raw material shortages, logistic issues, as well as delays in the availability of engine parts and components. Indeed, persistent supply-chain bottlenecks immensely affected Rolls-Royce’s engine production and maintenance schedules, resulting in the company incurring a charge of approximately $518 million (£382 million). Prolonged supply-chain disruptions are cited as the primary cause behind this charge.

Another challenge expected to impact Rolls-Royce in the near term is the recent imposition of tariffs by the U.S. administration on imported goods in America. While Rolls-Royce engines are currently exempt from U.S. tariffs, any sudden change made by President Trump in the near future could impact the company. Moreover, the company’s automotive division, particularly the Rolls-Royce Motor Cars plant in Goodwood, which manufactures luxury vehicles primarily for international markets, might face headwinds from potential U.S. tariffs on imported vehicles.

Final Call

To conclude, investors interested in RYCEY stock may consider adding it to their portfolio, taking into account its discounted valuation, strong performance at the bourses, solid long-term growth trends, upward revision in earnings estimates as well as upbeat near-term sales growth expectations.

The stock’s Zacks Rank #2 (Buy) further supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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