Financial Trading Blog
Stock of the day 19/11/2014 – Royal Mail
The postal service today announced their half year earnings, and some of the figures were troubling. Despite announcing a 1% rise in letter delivery, this was effectively rendered useless by a 1% drop in parcel delivery. This comes amidst a fall in pre-tax profits of £15 million, to £218 million form £233 million at the same point last year.
This news caused share prices in Royal Mail to fall by around 4%, from an open of 478.1 to an intraday low of 436.35. This follows a 0.07% drop on Tuesday in anticipation of the earnings release today. Whilst this isn’t as low as September’s 388.15, Royal Mail’s prices have fallen significantly since its privatisation. Royal Mail reached its all-time high of 615.5 in January 2014, after its initial offering price of 330 kept creeping after in the months after the IPO. However, a 9% drop in price caused by their full year earnings release in May caused stocks to fall to 517.5, and they have continued to slip since then, despite brief rallies in August and October.
As the Christmas season approaches, Royal Mail’s future should be looking brighter. However, CEO Moya Greene has warned that there are some looming issues for the company. The main worry for the postal service is the same as many companies: Amazon. Royal Mail predict that the retail giant could eat into its parcel delivery figures by as much as 2% in the next year, due to Amazon’s recent launch of a same-day delivery service that allows customers to collect items from various high street shops and newsagents.
It was between mid-December and mid-January 2013 that Royal Mail reached its record stock prices. Whilst it is unlikely that the company will be able to match the same levels as last year, as Greene said, Royal Mail’s yearly performance ‘depends on us delivering another great Christmas, for which we are fully prepared.’ After today’s muted news Royal Mail will certainly be hoping for a happy holiday season.
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