Royal Mail trading statement: is the share price rally justified?

While Royal Mail shares have slowly rallied since May, the overall outlook is tough. Will the gains of the past few months fizzle out following this week’s results?

When is Royal Mail’s trading statement published?

Royal Mail publishes its latest update on 6 February, covering the first nine months of its financial calendar.

Royal Mail earnings: what does the City expect?

Things are tough for Royal Mail. It faces stiff competition in its UK parcel delivery market, while letter volumes continue to decline. Its debt pile is set to grow as well, further increasing the burden on the firm. While the shares are only trading at 12.2 times forward earnings, this is comparatively expensive – investors, had they been brave enough, could have snapped them up at 7.6 times earnings in the middle of 2019. Now, what little good news investors might have enjoyed has been factored into the share price.

December is always a crucial period for Royal Mail, so any improvement in performance could lead to some short-term upside for the shares, although it will likely be short-lived.

How to trade Royal Mail earnings

The average move on results day for Royal Mail shares is 4.4%, although the publication of first-half figures in November wiped more than 13% off the share price. Of 12 analysts covering the stock, only two have ‘buy’ recommendations, with four ‘holds’ and six ‘sells’.

Royal Mail shares: technical analysis

While the shares have fallen sharply since May 2018, when they sat north of 500p, the price has, perhaps remarkably, carved out an uptrend since May 2019. The price has seen repeated higher lows in August, October and November, with the drop since early December taking the price back to potential trendline support from the May 2019 low. A break below 190p would be a bearish development and bring 185p into view, followed up by 180p and 172p.

If the current pullback carves out a higher low, then a fresh move higher may begin, targeting the previous higher high above 250p, last seen in December.

Is Royal Mail’s share price telling us something?

Perhaps it is the case that the modest, but still steady, gains in Royal Mail’s shares since May point the way to an improving fundamental outlook. If this is the case then investors should find out soon. If not, the bounce of the past nine months might soon be a distant memory.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

See opportunity on a stock?

Don’t miss your chance. Try a risk-free trade in your demo account, and find out whether your hunch could have paid off.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance. Upgrade to a live account to take advantage.

  • Trade a wide range of popular global stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform, when it matters

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Sell
Buy
-
-
China 300
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.