The Royal Mail [RMG] share price hit a record low of 120p just over a year ago, but has since rallied by more than 400%, as it quickly became apparent that the British postal and courier company was likely to be a big winner from the Covid-19 pandemic.
Royal Mail’s share price recovery
By May 2020, the Royal Mail share price had crept up from those April lows to 175p – and by yesterday’s close, RMG shares had climbed to 528.8p, a jump of 202% in 12 months.
The gains in Royal Mail's share price give the company a market capitalisation of £5.27bn, which is likely to see the company promoted to the FTSE 100 in the next quarterly reshuffle.
In the first half of this year, revenue increased by 9.8% to £5.67bn, however a sharp rise in costs led to the business slumping to an operating loss of £20m, driven by £85m in safeguarding measures as a result of Covid-19.
Parcels rise addresses fall in letter volumes
Unsurprisingly, addressed letter volumes were down 28%, as total letter volume dropped 33%, with adjusted operating losses here coming in at £180m, and revenue falling by 20.5%. However, parcel volumes more than compensated with a rise of 31%, and a rise in revenue of 33.2%.
In Q3, parcel volume had risen 37% year-to-date, as the business experienced its best-ever quarter, handling a total of 496m parcels.
Further outperformance anticipated
As we look ahead to the full-year numbers, more of the same is expected in terms of outperformance. Management has already delivered a one-off final dividend of 10p per share, with the business set to deliver a group adjusted operating profit of £700m.
Full-year revenue for the year is expected to come in £900m higher than last year. The company also said that restructuring costs were expected to be lower at £90m, instead of the previously anticipated £140m.
Wall Street analysts covering the Royal Mail stock are largely bullish, with six ‘buy’, four ‘hold’ and two ‘sell’ ratings, according to MarketBeat. While the analysts’ have an average 12-month price target of 417.2p, well below the current Royal Mail share price, their high target of 708p represents a gain of 33% from Tuesday’s closing level.
How will the Royal Mail share price react when the current FTSE 250 constituent releases its annual results at 7am on Thursday 20 May?
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