Royal Mail share price: UBS points to low visibility near-term

Analysts trim valuation on postal operator

Royal Mail share price: UBS points to low visibility near-term

Analysts at UBS have trimmed their valuation on Royal Mail Group (LON:RMG), pointing to low visibility in the near term. The move follows the postal operator’s interim results last week.

Royal Mail’s share price has been steady in London in today’s trading, having climbed 0.25 percent to 401.00p as of 14:24 GMT, largely in line with the FTSE 250 which currently stands 0.29 percent higher at 19,929.03 points. The group’s shares have lost more than 13 percent of their value over the past year, as compared with an over 13-percent gain in the mid-cap index.

UBS trims Royal Mail’s valuation

UBS, which has a ‘neutral’ rating on Royal Mail, trimmed its price target on the shares from 400p to 390p today, after the London-listed company recently reported a rise in profits and revenue for the first half of its financial year, on the back of strong performance at the group’s GLS business.

“Although letter mail volumes declined by 5% (underlying) this marked an improvement on the rate we have seen in the past nine months,” the analysts admitted, as quoted by Proactive Investors, adding, however, that visibility for the postal operator continued to be low, “with Christmas trading especially important for Royal Mail and therefore the trading update in January will be an important event”.

UBS also noted that its forecasts and assumptions would need to be reassessed in the event of industrial action amid a dispute with staff over pay and pensions, with Royal Mail currently in talks with the Communication Workers Union after the High Court blocked strike action.

“At the moment it is impossible to tell what the outcome of the mediation could be,” the broker pointed out.

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 325.00p. As of November 18, the consensus forecast amongst 17 polled investment analysts covering the privatised postal operator advises investors to hold their position in the company.  

As of 14:54 GMT, Tuesday, 21 November, Royal Mail share price is 398.64p.

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