DHL Group: FY24 Outlook Overshadows The Value Opportunity

seekingalpha09-10

DHL Express demand surcharges will likely benefit DHL 2024 earnings profile.B2B volume recovery and supportive H1 results.The company reiterated its outlook, and so did our buy rating. Michael Vi/...

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Michael Vi/...</p>\n\n<a href=\"https://seekingalpha.com/article/4720110-dhl-group-fy24-outlook-overshadows-the-value-opportunity\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>DHL Group: FY24 Outlook Overshadows The Value Opportunity</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDHL Group: FY24 Outlook Overshadows The Value Opportunity\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-10 17:26 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4720110-dhl-group-fy24-outlook-overshadows-the-value-opportunity><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>DHL Express demand surcharges will likely benefit DHL 2024 earnings profile.B2B volume recovery and supportive H1 results.The company reiterated its outlook, and so did our buy rating.   Michael Vi/...</p>\n\n<a href=\"https://seekingalpha.com/article/4720110-dhl-group-fy24-outlook-overshadows-the-value-opportunity\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4131","symbol_name":"航空货运与物流","start_time":0,"source_url":"https://seekingalpha.com/article/4720110-dhl-group-fy24-outlook-overshadows-the-value-opportunity","article_id":"2466848173","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1337715305/image_1337715305.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2466848173","pubTimestamp":1725960375,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"DHL Express demand surcharges will likely benefit DHL 2024 earnings profile.B2B volume recovery and supportive H1 results.The company reiterated its outlook, and so did our buy rating.   Michael Vi/iS","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4131":"航空货运与物流","BK4008":"航空公司","DLAKY":"Deutsche Lufthansa AG","DHLGY":"Deutsche Post AG","DPSTF":"Deutsche Post AG","DLAKF":"Deutsche Lufthansa AG"},"translate_title":"DHL集团：2024财年前景掩盖了价值机会","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DHLGY":1,"DLAKF":1,"DLAKY":1,"DPSTF":1},"content_text":"DHL Express demand surcharges will likely benefit DHL 2024 earnings profile.B2B volume recovery and supportive H1 results.The company reiterated its outlook, and so did our buy rating.   Michael Vi/iStock Editorial via Getty Images Following our recent analysis of Deutsche Lufthansa AG (OTCQX:DLAKF)(OTCQX:DLAKY), we are back to comment on DHL Group (OTCPK:DPSTF)(OTCPK:DHLGY). For our new readers, DHL was originally the German postal player while today (still offers parcel services) but is the largest international express operator and a critical logistics & freight company. Here at the Lab, since September 2023, DHL has been a strong buy recommendation supported by 1) Solid Results Above Pre-Pandemic Levels, 2) exogenous phenomena that provide positive price increase opportunities for global transportation companies, and 3) a tasty dividend yield combined with prudent management approach. Q2 Earnings Results and our Positive take Very briefly, the company reported H1 sales at €40.89 billion, compared to the previous year’s result of €41.01 billion. DHL performed resiliently with an acceleration in Q2. The company had negative FX risks with decremental sales of €137 million in the semester. According to the P&L analysis, the H1 core operating profit declined to €2.6 billion. According to our calculation, approximately 90% of this decremental output was due to salary inflation. DHL's net results reached €1.6 billion, with an EPS of €1.27. DHL Group H1 and Q2 Financials in a Snap Source: DHL Group Q2 press release - Fig 1 Looking at the Q2 results, the core operating profit came a touch ahead of expectations. These performances were supported by DHL's Express and Supply Chain division, and the other segments were slightly below Wall Street analyst's consensus. That said, the company reiterated its 2024 EBIT guidance between €6.0 and €6.6 billion (Fig 3). Considering that the Q3 company outlook is aligned with the Q2 performance and that €2.6 billion in EBIT had already been achieved in H1, this would imply at least €2 billion in core operating profit in Q4. Here at the Lab, we believe a Fiscal Year 2024 core operating profit miss is possible, and a downgrade risk in Q3 remains; however, we believe DHL's stock price already incorporates EBIT expectations between €5.7 and €5.8 billion, and we do not anticipate any further downside pressure. While we understand some analysts would have favored a clearing event rather than continued overhang risk, we continue to positively view DHL as an attractive company that might benefit from volume recovery and re-stocking activities. In addition, the company is backfilled with cost-saving initiatives and pricing activities. Our positive expectation of price is supported by Q4 output, typically the seasonally strongest quarter of the year, and DHL's announcement that it will include a peak season surcharge in the Express division from 15 September.  Here at the Lab, we anticipate that DHL could see a €150/€200 million in the core operating profit tailwind in 2024, intending to introduce similar demand surcharges in the future when demand outpaces supply. In our view, this favorable environment is due to the Red Sea distribution, which has shifted volume to air from ocean and is also supported by Chinese e-commerce players. With a recovery in demand, in our view, air cargo B2C capacity will likely continue to grow even in 2025. In addition, B2B businesses start turning back into growth territory following a prolonged period of inventory destocking (Fig 2); Although management cannot control the business cycle, we report that DHL management is performing a solid job managing cash flow and costs. The company reported additional cost measures for H2, including network re-balancing.  Quoting the Q2 report, the company reported that \"these two factors should allow us to achieve the low end of FY 2024 guidance. The strength of any cyclical acceleration will determine how much we exceed the floor of our guidance range.\" DHL Group recovery Source: DHL Group Q2 results presentation - Fig 2 DHL 2024 Guidance Fig 3 Earnings Changes and Valuation Considering the potential incremental sales/core operating profit generated by the surcharge, our team slightly reduced the 2024 EBIT from €6.3 billion to €6.05 billion. This is based on historical EBIT seasonality, and our main concern remains on volume development, which is now skewed in Q4. Here at the Lab, we now account for a Q3 EBIT of €1.35 billion, with a Q4 EBIT of €2.1 billion, taking into account approximately €300 million higher sales from the surcharge tailwind with a 0% volume growth compared to a previous expectation of +2% trade recovery in H2. Despite being optimistic about cost control, we remain at the low end of the company's guidance. Following a lower-than-anticipated EBIT evolution, we also cut our net earnings projection. With unchanged technical guidance on the corporate tax rate (€1.5 billion) and interest (€785 million), we anticipate profits at €3.49 billion with an EPS of €3.05. Given the lower EPS projection and an unchanged valuation methodology with a P/E of 13.5x, we derive a target price of €41 per share. Given the upcoming Capital Market Day (24th Sept), we believe the risk-reward remains skewed to the upside. DHL's downside risks are backed by an ongoing buyback and a tasty dividend per share. Looking at Seeking Alpha valuation data (Fig 4), we report that:  In the last five years, DHL's P/E ratio averaged 13.06x, compared to a sector median above 15x; DHL EV/EBITDA trades at 8x versus its peers at a double-digit rate.  SA valuation data Fig 4 Risks In our last analysis, we already reported DHL's main downside risks (Fig 5). We also include 1) the DHL Freight Forwarding restructuring process and its future profitability, 2) terrorist actions (Suez Canal with the Red Sea disruption), 3) cyber-attacks, and 4) natural catastrophe events. Additionally, we might also report potential strikes and ramping up capacity from airline players such as IAG and Deutsche Lufthansa AG Cargo division. Related to the surcharge, a successful implementation depends on a similar response from its closest comps, UPS and FedEx.   Mare Ev. Lab Previous Risks Section Fig 5 Conclusion In the medium term, freight volumes will likely increase thanks to Europe/Asia's higher capacity, which is driven by e-commerce growth. In addition, cost optimization and pricing power on the surcharge new tariff will support DHL 2024 margin. Here at the Lab, we continue to see a supportive valuation versus peers. Therefore, our buy rating is confirmed.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2466848173"}