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It’s been quite the year for Royal Mail shares. Early on things were going very well indeed, the stock finally surpassing the levels struck in the first few months of its market-existence as Royal Mail shares hit an all-time high of £6.33 in mid-May.

Yet since then the British Institution has been in serious trouble, in part related to concerns surrounding the impact of GDPR.

After striking that peak, Royal Mail shares immediately began to plunge, dropping back under £5 just a fortnight after that record high.

It continued to gradually drift lower as summer turned to autumn, before collapsing at the start of October as it lost 22% in a single session. Royal Mail shares now sit at a current trading price of £3.48.

Profit Warning

A rather nasty profit warning was responsible for that bloody October open.

The update wasn’t entirely without positives. UK parcel revenue and volume was up 6% for the first half of the year, and is now expected to be better than 2017/18, while its European arm GLS saw a 9% jump in revenue, though the division did see labour market and other cost pressures hurt margins to a greater extent than anticipated.

However, none of this really mattered to investors.

With interim letter volumes tumbling 7%, and UK productivity ‘significantly below plan’, it was forced to lower its cost avoidance target from £230 million to £100 million for the year. That leaves its adjusted operating forecasts at £500 million to £550 million for 2018/19, well below both the previous £652 million target and the previous year’s £694 million.

Whether or not Royal Mail shares can rebound on Thursday will be down to a) the avoidance of any further shocks, and b) a sign that adjusted operating profit will at least come in at the upper end of estimates.

Royal Mail shares have a consensus rating of ‘Sell’ alongside an average target price of £3.79.

This article is brought to you in association with Spreadex. All opinions expressed in this article are from the author and do not necessarily represent the opinions of The Armchair Trader. You can find out more about Spreadex products and services here, or find more articles from Connor Campbell here.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Connor Campbell

Connor Campbell

Connor joined Spreadex in 2014 as part of a newly expanded financial analyst team after graduating from the University of Southampton with an MA in English. His focus is on providing Spreadex's customers with up-to-date and informative news, and is responsible for the market analysis found on the Spreadex website.

Connor produces three daily market updates, a daily stock earnings preview, a weekly financial market preview piece every Friday, a round-up of all the big financial stories making the weekend press every Monday morning and regular stock market features.

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