EUR 850.00 For Business Accounts Only

Morningstar | No Real Surprises for Narrow-Moat Kuehne + Nagel in 3Q

Narrow-moat Kuehne + Nagel’s third-quarter update contained little in the way of surprises and was in line with our expectations for full-year 2018. The pattern of strong volume growth with flat to slightly down margins continued into the third quarter, with revenue increasing by almost 14% while EBIT margins were a touch down on the second quarter at 4.8%. We do not expect to make any material changes to our forecasts on the back of these results, nor to our CHF 144 fair value estimate. We believe the shares are currently fairly valued.

Divisionally, airfreight was the standout performer once again, with organic volume growth of more than 15% as the company’s strategy of targeting specific segments such as pharma and healthcare continues to pay dividends. Likewise, seafreight and overland posted solid revenue growth of 4.3% and 8.9%, respectively, with EBIT margins in the latter improving by 60 basis points to 2.2% year over year as restructuring efforts here come to fruition. Finally, in contract logistics, while revenue growth came in a very respectable 5.4%, EBIT margins dipped by 80 basis points year over year to 2.4% as the company increased its expenditure on infrastructure over the period.

In the longer term, as the logistic needs of customers become steadily more complex, requiring services such as multimodal transport, tracking capabilities, and temperature monitoring, business should naturally migrate to large providers with strong capabilities. As the largest provider in seafreight and the number-two provider in airfreight globally, KN is well positioned to take advantage of positive structural trends such as these.