Rolls-Royce Holding Plc (LON: RR) is in focus on Tuesday after the aerospace and defense giant announced a $75 million investment to expand its US manufacturing capabilities.
In its press release, the company confirmed plans of expanding its manufacturing plant in Aiken, South Carolina.
The announced expansion will significantly increase the output of mtu Series 4000 diesel engines – widely used in backup power systems for critical infrastructure, including data centres.
That said, Rolls-Royce stock is struggling to pare back its intraday losses at the time of writing.
Why does it matter for Rolls-Royce stock?
While initial response to RR’s announced expansion has been muted, the longer-term implications could be bullish as the investment grows its industrial footprint in the US.
That could prove a strategic win for Rolls-Royce for several reasons. First, it reduces reliance on overseas supply chains, particularly Germany, where majority of the mtu components are currently produced.
By machining more parts in the US, the company shortens lead times and improves responsiveness to American customers.
Second, the investment aligns with the surging demand for backup power in data centers, a sector expected to see over $1 trillion in global infrastructure spending in the coming years.
With more than half of the world’s hyperscale data centers located in the US, Rolls-Royce is positioning itself to capture a larger share of this booming market.
The move also signals a broader shift beyond aerospace into energy and power systems, diversifying revenue streams and enhancing resilience – all of which could translate into an increase in Rolls-Royce stock price over time.
Are Trump tariffs a risk for RR shares in 2025?
RR shares remain worth owning for the second half of 2025 also because the firm’s core business is well-insulated from higher tariffs under the Trump administration.
According to Citi analysts, only 8% of its widebody engine deliveries go to the United States, and its defense unit – accounting for 70% of US exposure – is largely domestic in production.
Power Systems division, which includes the mtu engines, has 10-20% US exposure, meaning only a small fraction of overall revenue is at risk.
CEO Tufan Erginbilgic has stated that the company is actively offsetting tariff impacts through operational improvements and strategic reshoring.
While tariffs could introduce volatility, diversified global footprint and strong order backlog offer Rolls-Royce shares a meaningful buffer against major disruptions.
How should you play Rolls-Royce at current levels?
Rolls-Royce stock has soared nearly 80% this year but analysts continue to see further upside in the British aerospace and defense company.
According to Wall Street, the consensus rating on RR stock remains at “overweight”, indicating the company may not be done pleasing its shareholders just yet.
A 0.60% dividend yield adds to the long list of reasons to own Rolls-Royce as well.
Note that RR is scheduled to reported its quarterly earnings on July 31st, which could serve as the next key catalyst for Rolls-Royce stock.
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