Royal Mail gets rush of broker upgrades amid dividend reinstatement hopes

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Citigroup expects the company to reinstate the dividend for the current financial year.



Royal Mail PLC (LON:RMG) shares ticked up even higher as a clutch of big-hitting brokers upped their price targets for the postal service.

The mail group has already seen its share price jump 250% since April on the back of burgeoning parcels demand.

Citigroup, though, suggests the shares will go to 550p with a third-quarter trading update next week set to underline the transformation in the group’s outlook.

The US broker upgraded in April on the hoped-for acceleration in parcel volumes and in November suggested there was scope for prices in parcels to rise, both of which now appear likely it says.

Underlying profits for the year to March 2021 to be £289mln, it now forecasts, and rise to £410mln in 2022.

The broker also expects the company to reinstate the dividend for the current financial year.

Yesterday, UBS analysts upgraded Royal Mail to ‘buy’ from ‘neutral’ saying they had increased their 2021 earnings expectations for the post carrier amid the “stricter and longer duration lockdowns” in the UK.

In a note, the bank also upped its price target for the FTSE 250 firm to 445p from 320p, adding that they also expected Ofcom’s recent recommendation to reduce mail deliveries to five days a week from six days will also help the firm’s UK parcels, international and letters (UKPIL) business save around £100mln per year.

Other brokers are similarly bullish. Goldman Sachs has raised its price target to 450p from 370p with a buy tag, while Jefferies played catch-up and lifted its target to 300p (145p). Jefferies has an underweight recommendation.

Royal Mail shares rose 0.3% to 421.1p.