Royal Mail Share Price Plunges to 18-Month Lows on Earnings Miss

The Royal Mail share price plummeted heavily this Thursday after earnings missed estimates. A labour dispute is also threatening to jeopardize the previous full-year outlook given by the company. 

In details released on Thursday, the UK postal company says its profit after tax was 612 million pounds for the year ended 27 March. This figure was short of the full-year profit after tax of 620 million pounds earned the previous year. This means that the company’s earnings per share fell from 0.618 pounds to 0.614 pounds. However, revenues rose from 12.64 billion pounds a year before to 12.71 billion pounds. 

Also, volumes from its parcel business, which is its most profitable business segment, fell 7% after the end of the UK lockdown, cut the dependence on parcel deliveries of essential items. However, volumes are still up 31% compared with 2020. 

Perhaps more concerning was the very guarded forward guidance for the current year. Royal Mail says that avoiding a potential strike by the Communication Workers Union (CWU) was critical to meet its 2022-2023 expectations of 303 million pounds. However, JP Morgan’s analysts are not optimistic that talks would progress enough to prevent a strike, which opens the door for substantial downside to estimates. The Royal Mail share price plunged 13.82% on the news, touching off 18-month lows. 

Royal Mail Share Price Outlook

The active daily candle is challenging support at 295.7. A breakdown of this level gives the bears access to 281.7 (16 November 2020 highs). Finally, 268.2 (17 November 2020 lows) comes into the picture on a further decline, while extreme price deterioration sends the price activity to the 250.3 price level.

On the flip side, the bulls need to preserve the support at 295.7 to provide a bounce opportunity that targets 310.8 (). Above this level, 323.6 (4/12 April lows) and 333.6 (8 March and 27 April lows in role reversal) form additional barriers to the north.

Royal Mail: Daily Chart