Flying High: IAG and Rolls-Royce Keep Investor Sentiment Soaring

Investors have plenty to look forward to early next year as two of the UK’s most closely watched listed companies, Rolls-Royce Holdings and International Airlines Group (IAG), prepare to announce their full-year results in February 2026.

Both firms are signalling continued operational strength, solid balance sheets, and firm commitments to shareholder returns through ongoing buyback programmes and future capital distributions.

Strong year for both shares

Rolls-Royce Holdings, a global leader in power systems and propulsion technology, serves the civil aerospace, defence, and power generation markets. Over recent years, the company has undergone a major transformation focused on efficiency, cash generation, and balance-sheet repair - progress that now appears to be paying off. Its share price reflects this turnaround: Rolls-Royce is up nearly 100% year to date and currently trading near its all-time high range, underscoring renewed investor confidence in its strategy and long-term growth trajectory. It also stands as the most held stock in the UK market on EasyEquities as of writing, highlighting strong retail investor conviction in its continued recovery and future potential.

IAG, the parent company of British Airways, is one of the world’s largest airline groups. Having successfully navigated post-pandemic recovery, IAG continues to deliver strong earnings growth and disciplined capital management, supported by sustained demand for air travel across its global network. The group’s shares are up more than 30% year to date and trading just below their 2019 highs, reflecting steady investor optimism around its earnings potential and balance-sheet strength.

Rolls-Royce delivers against expectations

In its latest trading update to 31 October 2025, Rolls-Royce confirmed that performance remains “in line with expectations,” reinforcing its full-year guidance of an underlying operating profit between £3.1 billion and £3.2 billion, and free cash flow between £3.0 billion and £3.1 billion. The group highlighted strong growth in large-engine flying hours, up 8% year-on-year and now at 109% of 2019 levels, alongside robust demand in its Defence and Power Systems divisions, despite ongoing supply-chain pressures.

Having reinstated its dividend last year and already paid twice this year, Rolls-Royce has re-established a track record of consistent shareholder distributions; it could also announce another dividend alongside its full-year results in February 2026, reinforcing its transition from turnaround to sustained value creation.

IAG maintains positive trajectory

IAG’s interim management statement for the nine months to 30 September 2025 also points to strong momentum. The airline group reported an 18% year-on-year increase in operating profit and a 27% rise in adjusted earnings per share.

IAG intends to announce further shareholder returns of excess cash at its Full Year 2025 results in February, based on projected cash flows and leverage at year-end, using its target leverage range of 1.2x to 1.5x as a guide for determining future distributions. This leverage range reflects a balanced capital structure, indicating that the group aims to maintain debt levels between 1.2 and 1.5 times its earnings before interest, tax, depreciation, and amortisation (EBITDA). 

In addition to its ongoing buyback programme, IAG has declared a dividend that is expected to be paid in December 2025.

Share buybacks near completion

Both companies are in the final stages of substantial share repurchase (share buyback) programmes:

• Rolls-Royce reports “good progress” on its £1 billion buyback, with £0.9 billion completed by end-October 2025.
• IAG has repurchased roughly €950 million of its €1 billion programme, with plans to complete the remainder by year-end and announce additional returns in February.

Outlook for investors

The upcoming February results could be pivotal; Both companies are set to confirm how effectively they’ve executed on their 2025 strategies and to outline their next phase of capital returns. Rolls-Royce’s strong operating performance, nearly complete buyback, and the likelihood of another dividend declaration highlight its growing consistency in shareholder rewards. Meanwhile, IAG’s improving earnings, strong leverage position, and planned 2026 dividend point to continued balance between reinvestment and returns.

Round Up 

Rolls-Royce continues to capitalise on civil aerospace recovery and steady defence demand, while IAG’s diversified airline portfolio supports earnings consistency and future shareholder payouts. With Rolls-Royce shares up nearly 100% and IAG up over 30% year to date, investor sentiment could remain notably positive ahead of their February 2026 full-year announcements, where both are expected to reinforce their progress and commitment to sustained shareholder value creation. 

Additional share buyback programme announcements could further boost investor confidence and support continued upward momentum in both stocks.

Sources – EasyEquities.

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