Royal Mail Group PLC delivered the right numbers more or less said brokers about the postal group’s trading update for the five months to end August 2021.
UBS noted the operating profit forecast for the half-year to September of between GBP395-400mln implies a second-half profit of around GBP510mln given the traditional 45/55 split between the half years.
July/August domestic parcel volumes were down 3% y/y against 7% y/y in the first quarter, which is better than the company indicated recently, though international volumes were sharply down.
The share valuation is cheap, adds the broker, but it not expecting much short-term excitement given that comparisons are tougher in the second half, some pricing benefits are fading and union negotiations loom into view again from next year.
Peel Hunt said trading in July and August was mixed with a slight worsening in revenue trends and continuing weakness in international volumes.
The broker is forecasting operating profit this year of GBP973mln, which would imply only GBP573mln in the second half down from GBP665m in the prior year.
Liberum is more upbeat on the revenue trends, saying although the parcels growth rate moderated in July and August, this appears to be a case of trends stabilising at structurally higher levels.
Royal Mail should see a stronger second half while GLS is absorbing any inflationary pressures.
UBS is a buyer with a 590p price target alongside Peel Hunt, while Liberum says hold with a 56p0 target.
Shares were down 1% at 477.7p.