HSBC has lowered its rating on Royal Mail Group (LON:RMG), arguing that the postal operator’s earnings before interest and taxes were likely to be lower than last year as positive earnings momentum was ‘some way off,’ Sharecast reports. The comments mark another analyst blow for the company after Jefferies pointed to Royal Mail’s low productivity in the UK as the group’s biggest challenge.
Royal Mail’s share price has surged in London this Monday, having gained 2.09 percent to 199.99p as of 08:54 BST, outperforming the FTSE 250 which currently stands 0.32 percent higher at 19,293.15 points. The group’s shares have given up more than 58 percent of their value over the past year, as compared with a near nine-percent fall in the Footsie.
HSBC trims target on Royal Mail share price
HSBC lowered their rating on Royal Mail to ‘hold’ on Friday, and further lowered their price target on the shares from 300p to 216p. Sharecast quoted the broker as commenting that the FTSE 100 group’s five-year strategy revealed in late May was ‘a credible plan’ but warned that it would likely take ‘time to deliver’ management’s long-awaited remedy for the progressive deterioration in the group’s profit outlook.
“The plan to increase automation and re-orientate the business towards parcels is credible and necessary, but based on our forecasts the benefits are clearly back end loaded,” the broker continued, “adding that in other words, it will take six years for profits to exceed where they were in 2018”.
Other analysts on postal operator
The 15 analysts offering 12-month targets for the Royal Mail share price have a median target of 240.00p, with a high estimate of 350.00p and a low estimate of 150.00p. As of June 7, 2019, the consensus forecast amongst 17 polled investment analysts covering the blue-chip group investors to hold their position in the company.