Hargreaves Lansdown says Royal Mail Group’s (LON:RMG) latest numbers are ‘reasonable,’ but ‘difficult to get too excited about’ without more information on margins. The comments follow the postal operator’s latest trading update which pointed to a small rise in overall revenue for the first three months of the company’s financial year.
Royal Mail’s share price rose in the previous session, with investors reacting positively to the group’s results. The group’s stock closed 1.81 percent higher at 489.50p, outperforming the blue-chip FTSE 100 index which added 25.88 points to end the session 0.34 percent higher at 7,626.33.
Hargreaves Lansdown weighs in on results
Citywire reported that Hargraves Lansdown had said that new GDPR rules around use of data and communication are reducing the number of direct mailings, which is bad news for Royal Mail.
“The letters business isn’t being helped by tough new penalties around data protection, introduced under GDPR, which are making marketers nervous about direct mailings,” the broker’s analyst Nicholas Hyett commented, as quoted by the newswire, adding that changes in the mix of UK parcels meant that revenue was not “keeping pace with volume growth, but that’s not the end of the world so long as margins aren’t being trashed”.
Hyett further noted that Royal Mail numbers were ‘reasonable’ but “with cost cutting a major focus…it’s difficult to get too excited without some indication of what’s happening to margins”.
Other analysts on privatised postal operator
Liberum Capital continues to see the company as a ‘sell’ without specifying a price target on the shares. According to MarketBeat, the group currently has a consensus ‘hold’ rating and an average price target of 480.08p.