Royal Mail owner, International Distribution Services, has delivered for investors today, rising more than 10% after analysts at Bank of America upgraded to ‘buy’ from ‘ neutral.’
“We are encouraged by turnaround progress at Royal Mail (RM) and how the new CEO is putting his stamp on operations – we see upside to consensus estimates,” BofA said.
The bank thinks the recovery at RM is progressing steadily and the company is winning back volume share.
BofA expects volume share to step up again from January (volume commitments are ‘locked’ for the peak period), as service quality continues to improve.
The broker has raised its 2025 adjusted Ebit forecast by 6% to reflect benefits of the union deal at RM, putting it 19% above consensus.
It has moved its price target to 335p from 275p reflecting the increased earnings and the target multiple for RM to 4x (from 3x) on self-help tailwinds, while UK parcel trends remain positive.
BofA thinks the shares look cheap and confidence in the turnaround should drive a re-rating.