Analysts at JPMorgan Cazenove remain bullish on Royal Mail Group (LON:RMG), having left their forecasts unchanged. The move comes after the postal operator updated the market on its first-quarter performance earlier this week.
Royal Mail’s share price has fallen deep into the red in today’s session, having lost 0.85 percent to 394.70p as of 13:19 BST, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing at 7,488.08 points, flat in percentage terms. The group’s shares have lost more than 14 percent of their value over the past year, as compared with a near five-percent rise in the Footsie.
JPMorgan Cazenove reiterated its ‘overweight’ rating on Royal Mail yesterday, with a price target of 550p on the shares, with the valuation including a £100 million step-up in cash pension contributions. Proactive Investors quoted the analysts as explaining that the shares appeared to “more than adequately discount the principal twin risks of pension/wage uncertainty and some degree of UK macro uncertainty”.
The comments are a boost for the privatised postal operator which is trying to replace its current defined benefit pension plan with an alternative scheme but hit a roadblock this month, as the Communication Workers Union rejected the group’s newest proposal.
Royal Mail updated investors on its first-quarter performance earlier this week, revealing a small rise in first-quarter revenues. While the postal operator benefitted from strong performance at its GLS division and a rise in parcel revenues, letter revenues continued to decline in the first quarter of its financial year.
The 16 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 462.50p on the shares, with a high estimate of 590.00p and a low estimate of 350.00p. As of July 20, the consensus forecast amongst 17 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.