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14 Jan, 2022 14:48 14 Jan, 2022 14:48

JPMorgan puts Royal Mail on 'Negative Catalyst Watch', shares slump

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Royal MailSharecast photo / Josh White

Royal Mail slumped on Friday after JPMorgan Cazenove placed the shares on ‘Negative Catalyst Watch’ ahead of the company’s next update on 10 February.

"While we don’t expect a disappointment on revenue, this will be supported by Covid testing and so will reverse over time," JPM said. "We also believe there have been various operational issues in the UK business, and expect these to result in higher cost, putting at risk the group’s previous £500m UKPIL operating profit guidance."

JPM, which rates the shares at 'overweight', noted that the number of offices experiencing delays with delivery has gone from 20 in late December to around 77 currently. It said this will be impacting quality of service, with the group incurring additional cost such as overtime as a result.

The bank said it suspects investors are giving Royal Mail the benefit of the Covid testing and are currently neglecting the offsetting negatives.

"We continue to like Royal Mail over time, but think the next few months may be difficult, with upcoming wage negotiations," it said.

The bank said it was cutting its forecasts by around 6-7%. The modest reduction in its price to 768p from 777p is due to higher FY23 net debt in its calculation, it said.

At 1445 GMT, the shares were down 5.9% at 495.09p.


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Pilling and Co Stockbrokers Ltd. is not responsible for the content or accuracy of third party news articles and we may not share the views of the author or publisher.

We provide third party news for your convenience and information only and make no representation or endorsement whatsoever and hereby exclude all liability for any loss or damage that may be incurred by you as a result of your access or use. Please note that third party content may be subject to terms and conditions imposed by the third party owner of that content.