Liberum remains bearish on Royal Mail Group (LON:RMG), even as the company posted a rise in profits for the first half of its financial year. The analysts, however, have pointed to cost savings and improvements which will be needed in the long term.
Royal Mail’s share price rose in the previous session, with investors acting positively to the results. The stock closed 1.67 percent higher at 395.50p. The shares, however, remain more than a fifth down over the past year, and more than 14 percent in the red in the year-to-date.
Liberum remains bearish on postal group
Liberum reiterated its ‘sell’ rating on Royal Mail yesterday, with a price target of 385p on the shares, following the group’s interim update, which revealed a rise in profits and revenue, on the back of strong performance at the group’s GLS business.
“The results were ahead of our forecasts, with an encouraging revenue performance in parcels and ongoing outperformance at GLS,” the broker’s analyst Gerald Khoo commented, as quoted by Citywire, adding, however, that the group’s management had “struck a cautious tone on the outlook for costs in the second half”.
The analyst argues that even “if parcels revenue strength can be extrapolated into the long term, which is by no means certain given ongoing competition, cost savings and productivity improvements are still needed”. Khoo added that any savings would be harder to make due to rising inflation and troubled industrial relations at the group.
Other analysts on Royal Mail
The 15 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 450.00p on the shares, with a high estimate of 590.00p and a low estimate of 320.00p. As of November 16, the consensus forecast amongst 17 polled investment analysts covering the privatised postal operator advises investors to hold their position in the company.