Rolls-Royce (LON: RR) share price finally made a strong bullish breakout this week as it moved above its previous YTD high. The stock surged to 335p on Tuesday, its highest point since February 2019. It has emerged as one of the biggest winners in the FTSE 100 index as it surged by over 800% from its lowest point during the pandemic.

Rolls-Royce Holdings has had a strong performance in the past few years, helped by several tailwinds in the industry. Civil aviation is booming as the number of flying hours has jumped sharply in the past few months. There is a strong demand for wide-body aircraft, which Rolls-Royce specialises in.

Further, there have been a tailwind in its defense industry as more countries invest in their national security. Its power business is also booming, especially now that the US, Australia, and the UK have started the AUKUS partnership. Rolls-Royce will have a role to play in that deal since it is a major manufacturer of engines.

The other tailwind is that the company has a new set of management that is implementing an ambitious turnaround strategy. This strategy includes boosting its sales, cutting costs, and improving margins. 

The management hopes that the operating profit will jump to almost £2 billion in the mid-term. That will be more than double in the last financial year. It also aims to have its operating margin rise to over 10%. It also aims to boost its free cash flow.

Thursday’s Rolls-Royce earnings will provide investors with more color about the state of the company. The expectation is that its underlying revenue jumped to £14.7 billion in 2023 while its underlying profit before tax (PBT) will be £1.09 billion. Analysts also expect that the free cash flow will be over £1 billion.

RR chart by TradingView

Making a stock’s prediction ahead of earnings is not easy since there are several moving parts. On the weekly chart, we see that the stock has risen in the past four straight weeks and is now hovering near its highest point since February 2019.

The stock has risen above all moving averages and the upper side of the ascending channel. This is a sign that bulls are still in control. But this can change, especially if the company’s earnings disappoint.

In the long term, I suspect that the stock will jump to the key resistance at 378.9p, its highest point in 2018. This price is about 14% above the current level. In the near term, I suspect that there will be some volatility after its earnings report.

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