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Industrial stocks are powering the FTSE 100 index higher this year. Just look at the share prices of Rolls-Royce Holdings (LSE: RR.), International Consolidated Airlines, or IAG (LSE: IAG), and BAE Systems (LSE: BA.) – they’re up between 26% and 76% in 2025.
Can these stocks continue to soar? Let’s take a look at broker share price targets to see what City analysts think.
Is Rolls-Royce overvalued?
Rolls-Royce shares have had a monster run this year, rising around 76%. That’s after huge gains in 2023 and 2024.
Now, upward trends like this can continue for longer than expected. However, it seems City analysts believe the stock’s likely to run out of steam soon.
Currently, the average price target is 876p. That’s around 12% below the current share price of 1,000p.
To be honest, the fact that the average share price is below today’s doesn’t surprise me. Because this stock looks a little overvalued to me right now.
Currently, it trades on a forward-looking price-to-earnings (P/E) ratio of about 42. That means it’s more expensive than Nvidia and most other ‘Magnificent 7’ stocks.
Given the high valuation, it’s not a stock I’m tempted to buy today. While the company is well positioned for growth given its exposure to defence and nuclear power, I’m concerned that a miss on profit expectations could derail the upward share price trajectory.
IAG: another 8% to climb?
Turning to IAG, it’s currently trading for 380p. That’s about 26% higher than the price it started the year at.
Brokers have an average price target of 409p however. That implies the stock could be capable of rising another 8% or so from here.
Personally, I wouldn’t be surprised to see the stock hit that target. Not only is it in a strong uptrend right now – thanks to a robust commercial aviation market – but the valuation remains low (the forward-looking P/E ratio is only seven).
That said, as a long-term investor, IAG’s not a stock that interests me. While airline stocks can be good short-term trades at times, they tend to be poor long-term investments.
In this industry, something always goes wrong from an investment perspective sooner or later (eg a war or a spike in fuel prices). So I’m happy to leave any potential short-term gains here to other investors.
BAE Systems’ growth potential
BAE Systems’ shares have rallied 65% this year. That’s not so surprising to me as defence has been one of the hottest themes in the market in 2025.
Now, City analysts do see further gains here. But they’re not expecting blockbuster returns in the near term. Currently, the average price target’s 1,973p. That’s only about 4% above the current share price of 1,901p.
I’m wondering if that forecast could be ignoring the tidal wave of defence spending that’s likely to come BAE Systems’ way over the next five years? With NATO countries committed to increasing their defence budgets, BAE Systems could see a ton of orders.
Given the backdrop, I actually think this stock looks interesting at current levels (and could be worth considering). I already have a defence ETF (which reduces the risks associated with defence orders going to certain companies and not others) but I haven’t ruled out adding this stock to my portfolio as well.
