Morningstar

DHL Earnings: Global Package Demand Challenged But Stabilizing

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Securities In This Article
DHL Group
(DHL)

Narrow-moat Deutsche Post DHL’s second quarter top-line was down 14% (organically) year over year, modestly below our expected run rate. Relative to the same period last year, lower revenue stems in part from retail-sector destocking and sluggish industrial end markets, and as global air and ocean forwarding demand and rates continue to correct off previously strong levels (especially on trade routes from China). On the positive side, overall express and forwarding volume trends appear to be stabilizing as the current normalization phase works through, and organic supply chain revenue was up about 5%, with help from healthy new business wins.

Consolidated EBIT margin fell 130 basis points to 8.4%, but came in ahead of our expected run rate on outperformance in most segments except for post and parcel, which is grappling with noise from union related wage inflation. The lower consolidated margin stems from lost volume related leverage, along with meaningful wage and cost inflation, though the firm seems to be executing well in terms of adjusting the network to sluggish volumes.

Macroeconomic risk remains elevated, but management raised the bottom end of its 2023 guidance slightly , calling for group-EBIT of EUR 6.2-7.0 billion (previously EUR 6.0-7.0 billion). This compares with roughly EUR 8.4 billion in 2022. We maintain our DCF-derived EUR 42 fair value.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Matthew Young, CFA

Senior Equity Analyst
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Matthew Young, CFA, is a senior equity analyst, AM Industrials, for Morningstar*. He covers transportation and logistics firms. Young is responsible for conducting in-depth fundamental research and valuation analysis, while generating investment recommendations and value-added insights for institutional buy-side and advisory clients. Key coverage sectors include the Class-I railroads, integrated parcel delivery (FedEx, UPS), trucking, and asset-light freight forwarding (C.H. Robinson, Expeditors International). Young has also covered companies across the commercial services, waste management, and financial services industries.

Before joining Morningstar in 2010, Young spent five years as an equity research associate at William Blair, where he covered logistics and commercial-services firms. In this position, he was responsible for conducting fundamental analysis, valuation modelling, and writing earnings notes and ad hoc reports.

Young holds a master’s degree in business administration, with concentrations in finance and accounting, from the University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst® designation. Young holds a bachelor’s degree in psychology and communications from Wheaton College.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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