October’s shock profit warning is likely to see Royal Mail Group (LON:RMG) get demoted from the FTSE 100 at the benchmark index’s quarterly review next week. Proactive Investors reports that according to Interactive Investor’s head of equity strategy Lee Wild, it would take a 12-percent share price rally to ensure the postal operator’s survival among London-listed blue-chips.
Royal Mail’s share price has fallen into the red in today’s session, having given up 1.14 percent to 329.10p as of 14:26 GMT. The group’s shares have lost over a fifth of their value over the past year.
Demotion from FTSE 100 expected
Royal Mail is largely expected to leave the FTSE 100 at the index’s next reshuffle scheduled for December 4. Proactive Investors quoted Interactive Investor’s Lee Wild as saying that even after the recovery in the group’s share price back near the float price of 330p, the privatised postal operator still remains only the country’s 117th largest listed company by market capitalisation, and over £400 million from safety.
“Even if we assume all other FTSE 100 constituents remain unchanged, it would currently require a 12% rally to guarantee Royal Mail’s survival in the top flight,” the analyst pointed out, adding that “without a miracle in the coming days, Royal Mail will be deserving of its reputation as a yo-yo stock”.
Royal Mail was promoted back to the FTSE 100 in March this year, after its shares were boosted by a pay and pensions deal with the Communication Workers Union. The group lost its spot in the benchmark index in 2017, nearly four years after it floated on the London Stock Exchange.
Analyst ratings update
The 17 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 325.00p on the shares, with a high estimate of 420.00p and a low estimate of 250.00p. As of November 24, the consensus forecast amongst 18 polled investment analysts covering the blue-chip group has it that the company will underperform the market.