DHL: HSBC forecasts 23% lower year on year EBIT for Q1

Ahead of the DHL Group’s Q1 2024 earnings results, HSBC Global Research analysts have predicted a 23% lower EBIT for the quarter as ‘the B2B segment remains challenged’ despite an improvement in overall demand. However, given that ‘the Group’s e-commerce business mix will likely offer stronger growth over the long term,’ HSBC retains DHL’s ‘buy’ rating alongside a slight reduction in target price from €50 ($54) to €48 ($51). HSBC predict DHL’s Q1 EBIT of €1.25bn ($1.34bn) will be down 17% quarter over quarter, ‘mainly due to margin pressure in express and further normalisation in forwarding’. Although China’s booming cross-border e-commerce (which takes ‘a sizeable share in air freight’) will boost B2C volumes, these ‘are accretive and the imbalance will continue to weigh on margins,’ with the B2B recovery ‘likely to take time’. As freight rates further normalise, weaker margins will also offset volume resumption. However, HSBC believes that ‘DHL’s e-commerce driven business mix could offer stronger growth over the long term and acts as a cushion against the near-term headwinds in forwarding’. Recognising these imbalances, HSBC predicts DHL’s 2024-2026 revenue and EBIT forecasts have been lowered by 2% and 2%-5% respectively, now below the mid-point of DHL’s own guidance range. These are primarily driven by weaker forecasts for DHL’s Express segment, where B2B volumes (accounting for just over half of total business) are ‘yet to show any meaningful turnaround’.