Deutsche Post Hits 4-Month High After Strong 2Q Earnings

By Geoffrey Smith -- Deutsche Post (OTC:DPSGY) (ETR:DPWGn) stock rose over 5% to a four-month high on Friday after the German logistics group said it continued to cash in on high freight rates during the second quarter, more than compensating for a slowdown in online shopping deliveries in its home market.

Revenue in the three months through June was up 23% on the year at 24.0 billion euros ($24.4 billion), while earnings before interest and taxes rose 12% to 2.4 billion euros. The results allowed the company to affirm its existing guidance for the year, even after accounting for a likely contraction in Germany. Basic earnings per share rose 14% to 1.20 euros.

The company acknowledged that "external market circumstances are marked by a high degree of uncertainty due to a series of partly related factors", pointing to inflation, the war in Ukraine, and the pandemic, but said the increased diversity of its business would protect it against any downturn.

EBIT at the company's DHL freight forwarding business more than doubled to 746 million euros in the quarter, reflecting the ongoing tightness in international freight markets, a trend that was also visible in Danish shipping giant Maersk's earnings upgrade earlier in the week. The result was also helped by "the ongoing ramp-up of benefits from the new IT system landscape" and the consolidation of shipping company Hillebrand, which it agreed to buy last year for 1.5 billion. That deal closed in March.

Lockdowns in China due to COVID-19 took their toll on air freight volumes, which fell 8% on the year, but rates were up 81% in the period.

On the downside, earnings from DHL's core Express business, its largest, fell 6% to 1.10 billion euros, in what chief financial officer Melanie Kreis called a "normalization" of business-to-consumer operations as the pandemic boom in online shopping and working from home receded. Earnings from the legacy German post business, meanwhile, fell 23% to 242 million euros.

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