EUR 850.00 For Business Accounts Only

Morningstar | No Surprises in DHL’s 2Q; Express and Parcel Growth Solid, while Post Grapples With Rising Costs

In the second quarter, narrow-moat Deutsche Post DHL’s reported gross revenue expanded roughly 2% year over year, or about 6.0% organically (6.5% last quarter). Reported revenue came in slightly ahead of our expected run rate for the year due to rising fuel surcharges and higher-than-anticipated growth in the e-commerce/parcel division. Organic growth remains solid at Express, the German parcel delivery operations are still expanding on the back of e-commerce tailwinds, and broader parcel-Europe operations appear to be gaining traction. Express’ TDI volume gains remain in the high single digits, and the global forwarding division is benefiting from better execution. Overall, since our longer-term midcycle revenue and margin assumptions remain largely intact, we are maintaining our EUR 28 fair value estimate. At approximately EUR 30.70, the shares are trading in fairly valued territory, representing a more reasonable valuation relative to lofty levels seen earlier this year, in our view.

Relative to the same period last year, the organic total-revenue increase reflects continued shipment growth at Express, with core TDI volume up about 8.5% (10% last quarter). Express’ revenue grew 12% organically, including higher fuel surcharges. Within the e-commerce/parcel unit, German parcel revenue rose 9% (9.5% last quarter). Global Forwarding net revenue was up 4% on improved airfreight sell rates, as air and ocean volume declined due to repricing efforts. Excluding exchange, supply-chain sales declined because of the Williams Lea Tag divestiture; it was up about 3% otherwise. Excluding restructuring costs, we estimate consolidated EBIT margin fell 40 basis points, to 5.1%, largely due to the Post-eCommerce-Parcel segment, where core margins declined because of higher wages and rising transportation-related outlays.