This is why Royal Mail’s share price has soared to 2.5-year highs!

The Royal Mail share price has rocketed again as the firm has upgraded its full-year forecast. Here’s why the UK share has reported strong trading recently.

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Investor appetite across UK share markets remains quite weak as fears over the public health emergency roll on. The FTSE 100 remains flattish around the 6,500 point marker while the FTSE 250’s dipped back below 21,000 points. But Britain’s oldest courier, Royal Mail (LSE: RMG), is having no such trouble attracting buyers in Thursday business.

This FTSE 250 stock has roared 5% higher thanks to the release of some upbeat third-quarter financials. It keeps the UK share’s strong momentum going (Royal Mail has risen 155% in value over the past 12 months). And an intra-day high of 473p per share earlier was the company’s most expensive price since September 2018.

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Royal Mail ups its revenue forecasts

In its bubbly statement, Royal Mail said that “an unprecedented third quarter” has prompted it to revise its full-year forecasts (to March 2021).

Royal Mail said it anticipates revenues for the year to be “significantly beyond” the forecast £380m-£580m it suggested back in November. As a result, it now expects adjusted operating profit to be “well in excess” of £500m, it added.

The courier said that stronger-than-expected trading in the third quarter and which had continued into January had prompted the revision. It added that its robust performance in that time had been “primarily driven by the reintroduction of nationwide Covid-19 restrictions, which was not built into our scenario from November.” It also said better letter volumes had boosted business in recent months.

Group revenues rose 20% year on year in the December quarter. For the nine months to December turnover was up 13.5% at a shade over £9.31bn.

Women wearing red sweater shopping online and using credit card at home office

E-commerce turbocharges parcel volumes

The 500-year-old company described the December quarter as its busiest ever in terms of British parcels traffic. Royal Mail shifted a mammoth 496m packages in that time, up 30% year on year. This drove revenues from its domestic parcels operations 43.3% higher.

The UK share also enjoyed a strong increase in parcels volumes at its overseas GLS division in Q3. Traffic here surged 27% because of similar Covid-19 lockdowns in some of its territories. The unit shifted a whopping 228m packages in that time. And this propelled GLS’s revenue 29.4% higher year on year.

Meanwhile Royal Mail saw volumes at its UK letters division fall 14% in the quarter. Revenue here dropped 8.5% on the year as a result. By comparison, letters volumes and turnover dropped 28% and 20.5% in the first six months of fiscal 2021.

Non-executive chair Keith Williams said the strong third-quarter performance was “driven by online shopping and the peak Christmas period.” He noted that “our busiest day during the quarter saw 32% more parcels delivered than our busiest day during the first national lockdown in 2020.” Royal Mail shifted a staggering 11.7m parcels on that third-quarter day.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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