Royal Mail share price: Analysts trim ratings in wake of profit warning

Both HSBC and RBC lower valuations on privatise postal operator

Royal Mail share price: Analysts trim ratings in wake of profit warning

Royal Mail Group (LON:RMG) has suffered another blow, with both HSBC and Royal Bank of Canada trimming their respective stances on the postal operator in the aftermath of last week’s profit warning. The moves come after UBS lowered its valuation on the London-listed group yesterday.

Royal Mail’s share price, which suffered a hefty slump last week, however, has climbed into positive territory in today’s trading, having gained 0.82 percent to 341.17p as of 13:37 BST. The shares are outperforming the broader UK market, with the benchmark FTSE 100 index having fallen into the red and currently standing 0.41 percent lower at 7,203.89 points.

HSBC now sees Royal Mail as ‘hold’

HSBC lowered its rating on Royal Mail to ‘hold’ today, also slashing its price target on the shares from 552p to 379p, in the wake of the postal operator’s profit warning last week which sent the stock tumbling. Proactive Investors quoted the analysts as saying that the most disturbing aspect of the profit warning was the update on productivity, with virtually no improvement in the first half of the year.

The broker further argues that it is “hard to build a credible investment case for Royal Mail until there is greater certainty about future cost-saving targets and the sustainable level of dividend payments”.

RBC downgrades to ‘underperform’

RBC meanwhile lowered its stance on Royal Mail to ‘underperform,’ trimming its valuation on the stock from 500p to 315p. Proactive Investors reports that the analysts reckon that despite the dramatic share price collapse, the current valuation does not yet fully reflect “the amplified profit risks from a cost miss”.

On the plus side, the broker’s calculations suggest that the company can continue to grow the dividend by a penny a year.

As of 14:00 BST, Tuesday, 09 October, Royal Mail share price is 345.30p.

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