Royal Mail share price rallies amid positive broker comments

Royal Mail Group (LON:RMG) has climbed to the top of the FTSE 100 leaderboard after analysts at Cantor Fitzgerald issued a ‘buy’ note following the company’s full-year results last week. The comments are a boost for the privatised postal operator which is currently facing wage and pension negotiations with staff.

As of 12:36 BST, Royal Mail’s share price had added 3.40 percent to 508.62p, outperforming the broader London market. The shares have gained about one percent over the past year, and are up some 13 percent in the year-to-date.
Analysts at Cantor Fitzgerald issued a ‘buy’ note on Royal Mail today, and raised their price target on the stock from 530p to 550p, noting that the group’s full-year update last week had been ‘encouraging’.

“Revenue and operating profits were up year on year and ahead of consensus estimates. European parcels continue to drive growth with cost cutting and productivity gains helping to protect margins in UK letters,” the broker’s analyst Robin Byde added, as quoted by the Guardian. “Following the update, our forecast changes are minor. We expect parcels in the UK and Europe to drive the top-line and restructuring and productivity gains to support the bottom-line. Even with forecast hefty capex, free cash should be healthy.”
The analyst further pointed to the FTSE 100 group’s labour negotiations arguing that while the company was facing “potentially tough” wage and pension talks, the risks were probably overstated.
The comments are a boost for Royal Mail which last week warned that market conditions remained challenging.
RBC Capital is also upbeat on the postal operator in the wake of the group’s results, moving its recommendation from ‘underperform’ to ‘sector perform’ and lifting its valuation on the shares from 445p to 525p. Liberum Capital, however, remains bearish on the stock, reaffirming Royal Mail as a ‘sell’ today with a price target of 360p.
As of 13:01 BST, Monday, 23 May, Royal Mail share price is 508.75p.