Deutsche Post DHL Navigating Freight and Parcel Slowdown, but Q4 Results Mostly in Line

Narrow-moat Deutsche Post DHL’s DPW fourth-quarter top-line trend flipped negative, falling 2.5% organically year over year (versus 11% growth last quarter) on less robust peak season demand, the retail-sector inventory restocking pullback, and weakening industrial end markets. Global air and ocean forwarding demand and rates (in particular) corrected heavily during the quarter. Lingering normalization of B2C activity (off pandemic highs) for express, e-commerce solutions, and parcel Germany also contributed to lower revenue, though comps are turning less challenging. Overall, however, these trends are not surprising, and revenue was generally in line with our expected run rate for the quarter.

Consolidated EBIT margin fell 140 basis points to 8.1% on lost volume-related leverage along with meaningful cost inflation. That said, segment margins didn’t deviate materially from our forecasts as we’ve been expecting normalization off unusually high levels seen throughout 2021. Macroeconomic risk remains elevated, but management established base-case 2023 guidance, which calls for group-EBIT of EUR 6.0 billion-EUR 7.0 billion. This compares with roughly EUR 8.4 billion in 2022. We don’t expect to materially alter our DCF-derived EUR 42 fair value estimate. The shares are appropriately valued, in our view.