Royal Mail share price steady as HSBC turns bullish on postal operator

Analysts argue concerns over decline in letter volumes are overdone

Royal Mail share price steady as HSBC turns bullish on postal operator

Shares in Royal Mail (LON:RMG) have gained ground in today’s session, as analysts at HSBC hiked their rating on the stock, arguing that concerns over a decline in letter volumes at the postal operator have been overdone. The comments follow the company’s recent quarterly update, as well as a major shareholder revolt over pay arrangements for Royal Mail’s new boss Rico Back.

As of 14:37 BST, Royal Mail’s share price had added 0.88 percent to 470.20p, largely in line with gains in the broader London market, with the benchmark FTSE 100 index currently standing 0.86 percent higher at 7,721.31 points. The group’s shares have added just over a fifth to their value over the past year, as compared with about a 4.7-percent gain in the Footsie.

HSBC upbeat on Royal Mail

HSBC lifted its rating on Royal Mail from ‘neutral’ to ‘buy’ today. Proactive Investors reports that according to traders, the bank’s analysts had explained in a note to clients that  concerns over a decline in letter volumes for the blue-chip company had been overdone. The analysts further argued that recent IT upgrades and labour agreements should provide further productivity gains and customer service improvements for the group.

The privatised postal operator delivered a two-percent gain in quarterly revenue last week, while noting that revenue at its  UK letters and parcels business had dipped six percent, dragged down by declining letter volumes.

Other analysts on group

The 16 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 500.00p on the shares, with a high estimate of 630.00p and a low estimate of 400.00p. As of July 20, the consensus forecast amongst 17 polled investment analysts covering the privatised postal operator has it that the company will underperform the market. 

As of 15:00 BST, Tuesday, 24 July, Royal Mail share price is 470.40p.

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