Royal Mail share price: Investors eye trading update next week

Royal Mail Group (LON:RMG) is expected to post a small rise in revenue when it updates investors on its trading performance next week. The results will follow the privatised postal operator’s strategy update in May when the company said that it was targeting operating profit margin of over four percent in 2021-22, increasing to over five percent in 2023-24.

Royal Mail’s share price has advanced in London this Friday, having gained 1.78 percent to 217.00p as of 14:27 BST, and outperforming the FTSE 250 which currently stands 0.50 percent higher at 19,539.75 points. The group’s shares have given up more than 55 percent of their value over the past year, as compared with a near six-percent drop in the mid-cap index.

Royal Mail to post trading update

Royal Mail is scheduled to post its trading update on Thursday and Proactive Investors reports that analysts at Jefferies forecast a three-percent rise in first-quarter revenue, driven by international parcels arm GLS and M&A, while UK parcel and letters division UKPIL is expected to have declined by 0.5 percent, with letters having dropped five percent and parcel revenues having limbed four percent.

“Royal Mail’s biggest challenge is its low productivity of 50% below the sector average,” the broker pointed out, adding that “further measures and accelerating top-line growth are required to mitigate rising people cost inflation to >5% in our view, while re-nationalisation risk will likely keep potential investors on the sidelines”.

Analysts on privatised postal operator

The 14 analysts offering 12-month targets for the Royal Mail share price for the Financial Times have a median target of 240.00p, with a high estimate of 325.00p and a low estimate of 150.00p. As of July 5, the consensus forecast amongst 17 polled investment analysts covering the mid-cap group investors to hold their position in the company.