Royal Mail share price in focus as group returns to FTSE 100

Return follows postal operator’s pay and pensions deal with trade union

Royal Mail share price in focus as group returns to FTSE 100

Royal Mail Group (LON:RMG) has been promoted back to the UK’s blue-chip index, six months after it fell out of the FTSE 100. The return follows a rise in the group’s shares which have been boosted by the postal operator’s deal with the Communication Workers Union (CWU) on pay and pensions.

Royal Mail’s share price, however, has fallen deep into the red in London this morning, having given up 1.18 percent to 553.40p as of 08:29 GMT, and underperforming the mid-cap FTSE 250 index which currently stands 0.15 percent lower at 19,658.72 points.

Group returns to FTSE 100

FTSE Russell unveiled the results of the blue-chip index’s quarterly reshuffle yesterday, announcing that Royal Mail would return to the Footsie, taking the place of Hammerson (LON:HMSO), which will drop to the mid-cap FTSE 250.

The group’s return to the benchmark index comes after the company recently reached a deal with the CWU on pay and pensions, avoiding industrial action, with the news fuelling demand for the postal operator’s shares.

The Financial Times, however, reported this week that the government had cautioned that Royal Mail and its union still had a ‘long way to go’.

Speaking at a conference in London, pensions minister Guy Opperman said that he had met with Royal Mail and CWU officials to discuss their joint proposal to offer workers a new type of risk-sharing retirement fund, not yet possible under the UK’s legal framework.

“I want to say that the meeting was very positive but both parties have a long way to go,” he pointed out, as quoted by the newspaper.

Analysts on Royal Mail

The 16 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 475.00p on the shares, with a high estimate of 600.00p and a low estimate of 300.00p. As of February 24, the consensus forecast amongst 18 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.

As of 09:04 GMT, Thursday, 01 March, Royal Mail share price is 548.60p.

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