Kuehne+Nagel Earnings: Still Negotiating Rough Seas

Soon after DSV released its results on Oct. 24, narrow-moat third-party logistics company Kuehne+Nagel KNIN reported a similarly stark third-quarter update. Revenue fell by almost 50% year over year, with EBIT declines coming in a touch worse. With no end in sight to the malaise, management’s commentary was focused on cost controls for the final quarter of 2023. We reiterate our CHF 220 fair value estimate and see the shares as moderately overvalued currently.

Like DSV, Kuehne+Nagel’s air and sea businesses also fared the worst. EBIT was down more than 50% in both segments. One positive was sea, where the company reported slight, but accelerating volume growth in the third quarter. Interestingly, while the road business did reasonably well in 2023 as a whole the decline in volumes was acutely felt in the third quarter.

After a period of being in an advantageous position, 3PLs like Kuehne+Nagel are now experiencing a difficult time as the balance of power shifts back to customers, at least partly. One of the key attractions for 3PLs is that they are asset-light and nimble, and thus able to adjust quickly to changing economic environments. For its part, Kuehne+Nagel has already reduced some costs in an effort to more closely match its capacity to current levels of demand. Additionally, as management highlighted on Oct. 25, volume and EBIT declines are stark year over year, but relative to precoronavirus levels EBIT for the first nine months of 2023 has doubled.