The unanticipated profit warning from FedEx Corporation (FDX stock) may have created an opportunity for investors to purchase Deutsche Post DHL Group shares.
The shares of the international package transportation and supply-chain firm (ticker: DPW.Germany) fell to 30.51 euros ($29.29), 15% below where they were before FedEx’s warning mid-September, as a result of the negative economic outlook seen by its rival. However, those worries might have been exaggerated since Deutsche Post DPW -1.04% stated in August that it would meet its full-year earnings forecast range under various economic scenarios.
FedEx CEO Comment on FDX Stock
While much remains uncertain in the upcoming months, CEO Frank Appel reaffirmed that position in an email to Barron’s, writing, “While much remains uncertain in the upcoming months, we have reconfirmed our Ebit guidance for 2022 of €8 billion (+/-5%).” He added that even if the global economy declines significantly in the upcoming months, FedEx still expects €7.6 billion to €8 billion.
FedEx (NYSE:FDX), on the other hand, completely retracted its full-year forecast after warning that “macroeconomic indicators drastically deteriorated” later in the June quarter.
So, despite impending fears about the global economy, Deutsche Post’s recent decline—down 45.5% this year—means that the shares are worth another look. To begin with, the stock is inexpensive, trading at eight times projected earnings as opposed to an industry average of more than eleven times.
Additionally, there is a potential that full-year earnings may be overestimated. Deutsche Post predicted that earnings would exceed €8.4 billion ($8.15 billion) in the year’s second half, exceeding its projections.
According to Stifel SF -2.82% analyst Johannes Braun, that information was a “guidance rise in disguise.” Braun has a Buy rating on the company and a €70 target price, which implies a 129% increase from the firm’s current price of €30.51. The FactSet consensus estimate of the stock’s analysts, who cover the stock, predicts profits before interest and taxes, or Ebit, of €8.5 billion.
It’s important to note that Deutsche Post anticipates a slowdown in business-to-consumer (B2C) volume growth in the second half as patterns return to normal. Earnings would still be in the higher end of its range under one of its other scenarios for a modest economic downturn. Even while it wouldn’t be disastrous, that doesn’t account for the stock’s recent drops.
The company’s DHL Express division is also a valuable asset. The company controls around 40% of the market for premium cross-border deliveries. DHL Express operates more than 320 specialized airplanes across its network and is in more than 220 countries and territories globally.
In the first half of 2022, the Express segment’s revenue increased 17% to €13.4 billion, or close to 30% of overall sales. Analysts predict that Express’ full-year revenue will be €24.5 billion, or an increase of 13% annually. Although the high freight rates from earlier in the year will probably normalize, the company’s air, ocean, and land freight segment was the primary source of income in the first half and is still on course for a successful year.
Among the more prominent names, “Deutsche Post DHL remains the most structurally attractive business,” J.P. Samuel Bland, an analyst at Morgan JPM -1.34%, wrote a note. He said, “That’s primarily due to the Express business.” The B2C segment of Express will likely see difficulties in the upcoming year, but overall, he added, things are still looking well. His rating is Buy, and his price objective is €52.50.
Around 83% of stock analysts that follow the company rate Deutsche Post as a Buy. An 85% increase over current pricing can be seen in the average projected price of €56.39. In September, Deutsche Bank increased its price objective for the company from €40 to €43, stating that it is “one for the long term—buy any dips.”
The market has fallen, and investors have to check more closely.
Featured Image: DepositPhotos © monticello
Author Valerie Remorosa 
