Stock Market News
Berenberg downgrades Royal Mail as growth and profit risks increase
Royal Mail was under the cosh on Friday as Berenberg downgraded the stock to 'sell' from 'hold', saying risks to the company's growth and profitability outlook are increasing once again.
"Regulatory change presents another headwind for mail volumes, while intense competition threatens revenue growth in parcels. Combined with various other cost pressures, we see little profit growth over the next three years."
Royal Mail highlighted the risk from adoption of the GDPR and said that the rate of volume decline might be at the upper end of the usual 4% to 6% range.
Berenberg said this was likely to prove to be a "best case" scenario.
"Companies are very uncertain about how to comply with GDPR and there is a strong possibility that they will temporarily rein in their marketing activities rather than risk breaching the regulations. We estimate that a 20% reduction in marketing volumes could hit overall mail volumes by an incremental 2%, or about £80m of revenue."
The bank cut its FY19 and FY20 earnings per share forecasts by 14% and 12% to reflect its concerns about growth and margins. As a result, Berenberg is now 7% and 8% below consensus.
"We think much of the recent re-rating will likely reverse, if trading disappoints," it added, keeping its 460p price target on the stock unchanged.
At 1550 BST, the shares were down 3.3% to 527.40p.
"Regulatory change presents another headwind for mail volumes, while intense competition threatens revenue growth in parcels. Combined with various other cost pressures, we see little profit growth over the next three years."
Royal Mail highlighted the risk from adoption of the GDPR and said that the rate of volume decline might be at the upper end of the usual 4% to 6% range.
Berenberg said this was likely to prove to be a "best case" scenario.
"Companies are very uncertain about how to comply with GDPR and there is a strong possibility that they will temporarily rein in their marketing activities rather than risk breaching the regulations. We estimate that a 20% reduction in marketing volumes could hit overall mail volumes by an incremental 2%, or about £80m of revenue."
The bank cut its FY19 and FY20 earnings per share forecasts by 14% and 12% to reflect its concerns about growth and margins. As a result, Berenberg is now 7% and 8% below consensus.
"We think much of the recent re-rating will likely reverse, if trading disappoints," it added, keeping its 460p price target on the stock unchanged.
At 1550 BST, the shares were down 3.3% to 527.40p.
Related share prices |
---|
Royal Mail (RMG) share price |
Stock News headlines are gathered from financial news sources around the web. Views and opinions on each item are from their respective authors and website. They are not opinions of LiveCharts.co.uk
Get a free widget for your website with our latest headlines.
You can now add our live prices and new headlines to your website.The news widget features quotes for Oil prices, spot Gold price and Indices plus a choice of news channel for healines.
Top Shares pages
- Share price quotes
- Share charts
- Share watch list
- Company Results Calendar
- Top Large UK Shares
- UK Market Sectors
- Stock market news
- Company news
- Share tips
- A-Z company search
More share features
POPULAR Share Prices
- Royal Mail share price
- Lloyds share price
- HSBC share price
- Barclays share price
- Prudential share price
- Santander share price
- NEXT share price
- Diageo share price
- BP share price
- Vodafone share price
- British Airways
- Centrica share price
- Tesco share price
- Taylor Wimpey Share Price
- National Grid
- GKP Share Price
- Marks and Spencer
- Rolls Royce
- Rio Tinto
- THG Share Price
- Aviva Share Price
- Boil Share price
- Easyjet Share Price
- Genedrive Share Price
- SSE Share Price
- IAG Share Price
- Boohoo share price
- HE1 share price
- AVCT share price
- BOOM share price