Shares of Royal Mail (RM) owner International Distributions Services (GB:IDS) soared 11.7% on December 12 on a rating upgrade by analysts at American research firm Bank of America (NYSE:BAC). The analysts upgraded IDS shares to Buy from Hold and lifted the price target to 335p (23.9% upside) from 275p.
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International Distribution Services is a London-based postal and courier service provider with operations spanning Europe, the Western U.S., and Canada. IDS operates two main units: Royal Mail (RM) and General Logistics Systems (GLS). Year-to-date, IDS stock has gained 24.5%.
Here’s Why BofA is Bullish on IDS
Analysts at BofA believe that IDS shares are currently cheap. Moreover, its turnaround strategy is progressing well, with volume share returning. They believe that beginning January 2024, volume share will probably beef up as IDS continues to improve its service quality. Accordingly, BofA has raised the model estimates above those of the consensus expectations. The research firm increased the adjusted EBIT (earnings before interest and tax) estimate for 2025 by 6%.
Also, BofA is highly optimistic about the trends in the U.K. parcel service sector. RM remains a prime beneficiary of the positive momentum, especially after reaching a deal with the Communication Workers Union (CWU) in April 2023. The union pact is expected to benefit IDS’ profit and loss account beginning the fourth quarter of 2024. Also, the expense base will reduce as inflation cools, BofA added.
What is the Forecast for Royal Mail Shares?
On TipRanks, IDS stock has a Moderate Buy consensus rating based on two Buys and one Hold rating. The International Distributions Services share price forecast of 303.63p implies 12.3% upside potential from current levels.
