Deutsche Post

Deutsche Post Shares Gain on Strong Profit Outlook; Target Price EUR 53

The world’s largest courier company Deutsche Post forecasts operating profits to grow this year and next after recording more than 50% jump in the last quarter as the coronavirus pandemic drove a massive shift towards e-commerce deliveries.

German multinational package delivery and supply chain management company forecasts EBIT to further grow in 2021 from the underlying base in 2020 of around EUR 5.4 billion. Moreover, the company’s EBIT for 2022 is expected to be above 2021.

The outlook for the aggregated free cash flow for the period 2020 to 2022 is revised to more than EUR 6 billion, up from the previous EUR 5.0 – 6.0 billion. The total gross capex for the period is now expected to be at around EUR 9.5 billion.

The courier company said it will provide a detailed outlook for the years 2021 and 2023 when it releases its comprehensive consolidated annual results on March 9.

Deutsche Post shares closed 2.15% higher at €41.83 on Tuesday; the stock rose about 20% in 2020.

“We think the positive share reaction to DPDHL’s beat in 4Q and upgraded guidance up to 2022 is justified: the group pre-announced 4Q results with 11% 4Q EBIT beat vs Bloomberg consensus, and new FY21 outlook implies a 4% upgrade to FY21 consensus expectations,” noted Rasika Sankpal, equity analyst at Morgan Stanley.

“While FY22 outlook has also been upgraded (to above EUR5.4bn, vs upper range at above EUR5.3bn previously), this is already in line with consensus. EBIT upgrade is also driving higher FCF, which is reassuring.”

Deutsche Post Stock Price Forecast

Sixteen analysts who offered stock ratings for Deutsche Post in the last three months forecast the average price in 12 months at €45.60 with a high forecast of €53.00 and a low forecast of €37.50.

The average price target represents a 9.21% increase from the last price of €41.76. From those 16 analysts, 14 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of €37.5 with a high of €51.5 under a bull scenario and €21 under the worst-case scenario. The firm currently has an “Overweight” rating on the courier company’s stock.

Several other analysts have also recently commented on the stock. Deutsche Post AG received a €50.00 price objective from research analysts at Sanford C. Bernstein. JP Morgan set a €49.52 price target and gave the stock a “buy” rating. Barclays set a €47 target price and gave the company a “buy” rating.

In addition, UBS Group set a €45.00 price target and gave the company a “buy” rating. Warburg Research set a €40 price objective and gave the stock a “neutral” rating. At last, Baader Bank set a €40 target price and gave the company a “buy” rating.

Analyst Comments

“The group outlined several productivities and cost control measures at P&P and progress has been made over the year, providing conviction that management is on track. Reiteration of FY20 group EBIT targets at the CMD underscores support for the mid-term FCF profile and valuation attractions,” Morgan Stanley’s Sankpal added.

“DHL is a solid business with a return on capital substantially above its cost of capital. Margins still have room to grow toward best-in-class levels, but capital employed, and contract structures could limit the full closure of the gap. DP’s P/E multiples still lag leading peers in each business unit, indicating there is more room for upside in every business.”

Upside and Downside Risks

Risks to Upside: 1) Pricing Power. 2) Cost Control. 3) Increased efficiencies. 4) Working capital management– highlighted by Morgan Stanley.

Risks to Downside: 1) Global trade risks. 2) GDP growth slowdown. 3) Wage inflation. 4) In addition, DP could be subject to regulatory reviews that impact operations and cash flows.

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