Royal Mail H1 preview: Where next for the Royal Mail share price?

Josh Warner
By :  ,  Market Analyst

When will Royal Mail release H1 earnings?

Royal Mail will publish interim results on the morning of Thursday November 18.


Royal Mail H1 earnings preview: what to expect from the results

Royal Mail has already provided insight into how it performed in the first five months of its financial year.

We have seen Royal Mail deliver fewer parcels this year compared to the last, when the initial boom in online shopping occurred as non-essential retailers were forced to close during lockdown. Despite some wavering when it comes to volumes this year, the company has said there is evidence that parcel volumes are re-basing at a higher level than before the pandemic – with volumes still over one-third higher than before the Covid crisis started. Meanwhile, letter volumes have rebounded from last year but remain below pre-pandemic levels, as the long-term trend of fewer letters being sent each year continues. Eyes will be on the performance of Royal Mail’s international parcel volumes after the company warned its UK business was ‘more robust against the ongoing challenges in international’.

GLS, the parcel service, has continued to see parcel volumes rise this year, albeit at a much slower rate than last year when it experienced a pandemic-induced boom.

Five Months to August (Millions)




Royal Mail Parcel Volumes




Royal Mail Letter Volumes




GLS Volumes




(Source: Royal Mail)

Still, the company has managed to continue growing revenue across the board thanks to higher prices and a more favourable sales mix. This resulted in overall revenue rising 8.2% in the first five months and coming in over 17% higher than pre-pandemic levels.

Five Months to August (£, millions)




Total Revenue




Royal Mail Revenue




GLS Revenue




(Source: Royal Mail)

With the interim results to include another month of results, analysts forecast revenue will rise to £6.02 billion in the first half from £5.67 billion the year before.

Royal Mail has said adjusted operating profit should be between £395 million to £400 million in the first half, with Royal Mail to contribute ‘at least’ £230 million. Analysts believe Royal Mail will beat its target with profit of £415.7 million, which would be a marked improvement from the £37.0 million delivered last year.

Importantly, the Royal Mail unit will see adjusted operating profit (and its margin) improve in the second half compared to the first, despite warning that it is anticipating some upward pressure on costs going forward. Meanwhile, GLS is expected to report an operating margin of 8% over the full year and deliver low single-digit percentage growth in revenue.

Pretax profit is expected to climb to £444.0 million in the first half from just £17.0 million last year, when one-off Covid-19 costs and increased investments in its parcel business weighed on its bottom-line. Adjusted pretax profit is forecast to follow higher to £423.6 million from £18.0 million.

Royal Mail shares hit their highest level since May 2018 back in June, but the stock has slipped almost 25% since then. Brokers believe the selloff in recent months has left Royal Mail severely undervalued. The 15 brokers covering the stock currently have a Buy rating and an average target price of 643.93p, implying the stock can climb to new all-time highs and that there is over 44% potential upside from the current share price.


Where next for the Royal Mail share price?

After reaching a two year high of 613p in early June, the Royal Mail share price has been trending lower, forming a series of lower highs and lower lows. 

The price found a floor at 405p and has been attempting to rebound higher.  

The re-taking of the 50 sma and the bullish RSI are keeping buyers hopeful of further upside towards 470p, the mid-September low. A break above here could expose the 200 sma at 500p. 

On the flip side, the 50 sma fell below the 200 sma in a death cross signal suggesting more losses could be on the cards. Sellers might look for a move back below the 50 sma at 441p to target 403p, the October low. A break below here could expose 380p, the late January low. 

Where next for the Royal Mail share price?


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