Rolls-Royce receives raft of further broker downgrades

Analysts at JPMorgan Cazenove, Investec and Liberum have all taken a more cautious view on Rolls-Royce after the engine maker lowered its full-year revenue guidance last week.

The engineering group said on Friday that it now expects underlying revenues to fall 3.5-4% in 2014 due to deteriorating economic conditions and the impact of Russian trade sanctions. The company had previously estimated underlying revenues to be flat year-on-year.

Free cash flow (FCF) in 2014 is now expected to be just £350m. The firm had previous guided to flat FCF on 2013's £780m.

It also said that the change in underlying revenues in 2015 would be roughly 3%, having initially said it would "resume growth" next year.

Liberum on Monday downgraded the stock from 'buy' to 'hold', slashing its target price from 1,225p to 900p.

The broker said that FCF was the area that it had been the "most nervous" about this year, and it now "fear[s] the risk in 2015 is to the downside". It said that the stock is not likely to trade on much more than its medium-term average rating.

Investec lowered its recommendation from 'buy' to 'hold', cutting its target for the shares from 1,170p to 850p. It said that Friday's gloomy update had "again shattered confidence".

"Investors are likely to demand change, but otherwise the shares look to be dead money for now," the broker said.

JPMorgan, meanwhile, cut its stance from 'overweight' to 'neutral' and reduced its target price from 1,250p to 950p.

The stock was more or less flat at 832.3p by 11:04, having fallen over 11% the previous session.