Royal Mail share price outperforms as Jefferies hikes valuation

Analysts continue to see postal operator as ‘underperform’

Royal Mail share price outperforms as Jefferies hikes valuation

Shares in Royal Mail Group (LON:RMG) have climbed into positive territory in today’s session, as Jefferies lifted its discounted cash flow-based price target on the stock. The analysts, however, continue to see the privatised postal operator as an ‘underperform’.

As of 13:03 BST, Royal Mail’s share price had added 0.55 percent to 507.40p, outperforming the broader UK market, with the benchmark FTSE 100 index having slipped into the red and currently standing 0.53 percent in the red at 7,590.71 points. The group’s shares have added a little over 14 percent to their value over the past year, as compared with less than a one-percent rise in the Footsie.

Jefferies hikes valuation on Royal Mail

Jefferies, which rates Royal Mail as an ‘underperform,’ lifted its price target on the shares from 300p to 400p today. Proactive Investors quoted the analysts as saying that shareholders in the postal operator would now have to share the fruits of any productivity improvements with the people providing them.

“We now assume the impact of the shorter working week will be largely absorbed by productivity improvements related to changes in workflow and better resource scheduling and have increased adjusted EBIT [earnings before interest and tax] estimates by up to 25 percent,” the broker pointed out.

The comments come less than a month before Royal Mail’s trading update on July 17 and the analysts expect the results to reflect an underlying addressed letter volume decline year-on-year of more than six percent, which would be outside of the postal operator’s guided range of between four and six percent decline.

Other analysts on the postal operator

The 16 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 512.50p on the shares, with a high estimate of 630.00p and a low estimate of 300.00p. As of June 15, the consensus forecast amongst 17 polled investment analysts covering blue-chip group has it that the company will underperform the market.  

As of 13:35 BST, Tuesday, 19 June, Royal Mail share price is 507.20p.

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