Deutsche Post, the parent of�express-delivery business DHL, can still deliver for investors.
The stock can get a lift from a solid fourth-quarter performance in 2012, but it also can benefit in the short term from the distractions of two major rivals, United Parcel Service (UPS) and TNT Express, whose merger was blocked this month by European competition authorities.
Its shares closed Thursday at 17.27 euros, just shy of its 52-week high of EUR17.45 and up 4% since the start of 2013. It trades at just 12.5 times forecast 2013 earnings of EUR1.39 per share. That looks like good value compared with multiples of roughly 16 at FedEx (FDX), UPS and TNT Express.
A consensus of analysts� price targets suggests the stock can reach EUR18.16 in the next 12 months, though targets range as high as EUR22, a return of more than 25%.
The German mail giant suffered a weak third quarter when its earnings were hurt by the repayment of state aid and an additional bill for VAT. It should get back on track when it reports full-year results in March that should reflect the seasonally strong fourth quarter.
Deutsche Post is expected to report earnings of EUR1.28 per share in 2012, up from 96 European cents in 2011.
Chief Executive Frank Appel, speaking on the sidelines of the World Economic Forum in Davos, Switzerland, says DHL could only gain from regulators� decision to investigate the proposed tie-up between UPS and TNT Express, regardless of the outcome.
Even if the deal had been given the green light, the two companies would have been focused on integration. Now that it has been rejected, TNT Express, the market leader in Europe, has to refocus its strategy. �We always said we could only win in this situation,� Appel says.
That transaction aside, Appel reiterated his confidence that express-delivery unit DHL can grow its profit margin, which currently stands between 7.5% and 8%. �We still think there is potential to bring that closer to 10(%) in three years,� he says. That�s important because Deutsche Post generates the bulk of its earnings from DHL.
At the same time, Deutsche Post�s dividend yield of 4.1% is far superior to those of its rivals. That�s another reason to give this stock a stamp of approval.
No comments:
Post a Comment