The German logistics firm Deutsche Post AG (OTC: DPSGY) reported a fiscal 2020 third-quarter profit that increased from the similar period last year. The company’s revenues also increased primarily from the robust performance of the global e-commerce business. Deutsche Post DHL Group also reaffirmed its FY 2020 EBIT outlook, which was upwardly revised recently.
The company also upwardly revised its free cash flow view while confirming its FY 2022 earnings forecast. However, considering the overall economic uncertainty, the market reacted negatively to the earnings report. The stock closed at $45.74, down $1.84 or 3.87% from the prior close.
Deutsche Post reported third-quarter revenues of €16.24 billion, up 4.4% from €15.55 billion in the comparable quarter last year. The revenue growth was led by Parcel, Express and e-Commerce Solutions divisions. Organic revenue growth was 9% for the third quarter.
The company reported a 3Q 2020 net profit of €851 million, up 51.7% from €561 million in 3Q 2019. On a per-share basis, earnings were $0.67, an increase of 53.3% from €0.45 a share last year. Operating profit (EBIT) increased 46.2% y-o-y to €1.38 billion. Likewise, the EBIT margin increased to 8.5%, from 6.1%.
Post & Parcel revenues (Germany) increased 3.4%, while Express revenues rose 14.6%. e-Commerce solutions revenues soared 26.1%.
Regarding the third-quarter results, CFO Melanie Kreis stated, “We have not only significantly increased our profitability, but also our cash flow. This is particularly important in the current uncertain economic environment. We are thus very well positioned to continue to invest consistently in profitable growth and the implementation of our Strategy 2025.”
Deutsche Post also stated that it is well-positioned to attain substantial growth due to a surge in e-commerce.
Looking ahead, for FY 2020, the company anticipates operating profit of between €4.10 billion and €4.40 billion. This compares with EBIT of €4.13 billion posted last year.
Deutsche Post has cautioned that the company will be able to achieve the top end of the guidance range only if the increase in volume is backed by efficient utilization of its delivery infrastructure.
Additionally, the company expects adjusted EBIT for FY 2020 to be in the range of €4.71 billion to €5.01 billion, higher than the previous year’s €4.05 billion. The company now anticipates FY 2020 free cash flow of over €2 billion, higher than an earlier forecast of over €1.80 billion.
The company stated that it continues to anticipate investing about €2.90 billion in FY 2020. Deutsche Post also affirmed its FY 2022 EBIT guidance range of between €4.70 billion and €5.30 billion.
The upbeat quarterly results and reaffirmation of the FY 2020 outlook are expected to turn the stock bullish in the days ahead.
The historical price chart indicates that the stock has broken the long-term resistance at 37. The stock is also moving along the ascending trend line, with Chaikin money flow indicator in the positive region. Therefore, we are anticipating the stock to consolidate at the current levels and begin a new rally in the days ahead.
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