Royal Mail share price rises with UBS no longer bearish on group

on Oct 11, 2017
Updated: Mar 11, 2020

Shares in Royal Mail Group (LON:RMG) have jumped in today’s session, as analysts at UBS lifted their stance on the company, arguing that the postal operator was now fairly valued. The comments are a boost for the company which is currently trying to solve a dispute with a labour union over its plans to replace its defined benefits pension scheme with a cheaper alternative.

As of 13:14 BST, Royal Mail’s share price had added 1.25 percent to 387.40p, outperforming the mid-cap FTSE 250 index which has slipped marginally lower and is currently 0.08 percent worse off at 20,130.85 points. The group’s shares have added more than six percent to their value over the past year, and are up by some five percent in the year-to-date.

UBS sees Royal Mail as ‘fairly valued’

UBS lifted its rating on Royal Mail from ‘sell’ to ‘neutral’ today, arguing that the recent drop in the group’s share price meant that it was ‘fairly valued’. The analysts kept their price target of 390p on the stock.

“One positive has been that UK eCommerce growth has remained at 10-15%. We believe this could result in H1 parcel revenue being above our full-year forecast (+1%),” the analysts pointed out, as quoted by Proactive Investors. The broker, however, warned that it could still not recommend buying the stock, given the threat of industrial action which is currently hanging over the group.

Pension saga continues

In a separate development, Reuters reported today that the Communication Workers Union had said that it would defend its position at London’s Royal Courts of Justice tomorrow, after Royal Mail sought an injunction with the High Court in an effort to prevent a strike.

A spokesman for the postal operator, however, told the newswire in an email that the court was yet to confirm the hearing date.

“We believe any strike action before the dispute resolution procedures have been followed would be unlawful strike action,” he pointed out.

As of 13:55 BST, Wednesday, 11 October, Royal Mail share price is 388.90p.