Morgan Stanley has lifted its valuation on Royal Mail Group (LON:RMG), while maintaining its ‘underweight’ rating on the shares. The move followed the postal operator’s recent full-year results earlier this month when the company revealed a drop in profits.
Royal Mail’s share price has been little changed in London in today’s session, having given up 0.08 percent to 516.40p as of 14:14 BST, and underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.27 percent higher at 7,653.01 points. The group’s shares have added more than 18 percent to their value over the past year, as compared with about a 1.7-percent drop in the Footsie.
Morgan Stanley lifts price target
Morgan Stanley, which sees Royal Mail as an ‘underweight,’ lifted its price target on the shares from 440p to 480p today. Proactive Investors quoted the analysts as saying that the postal operator’s full-year results had “revealed a solid business foundation and opportunity to yield returns from further business investment and labour practice changes following CWU [Communication Workers Union] negotiation”.
The broker, however, added that the group had “significant work to do on rebuilding margins in the core business,” and had to “combat both the structural decline in mail volumes and network access volume growth”. Morgan Stanley further noted that unless the company achieves revenue growth in parcels and mitigates inflation in the cost base via productivity gains, “margins and cash flows could come under significant pressure”.
Other analysts on Royal Mail
The 17 analysts offering 12-month price targets for Royal Mail for the Financial Ties have a median target of 525.00p on the shares, with a high estimate of 630.00p and a low estimate of 300.00p. As of May 25, the consensus forecast amongst 18 polled investment analysts covering the privatised postal operator advises investors to hold their position in the company.