Street Calls of the Week
Investing.com -- BofA Global Research downgraded logistics and courier services provider DHL Group to “underperform” from “neutral” and cut its price objective to €35 from €41, warning of weaker demand and falling earnings forecasts, in a note dated Monday.
Shares of the German company were down 1.5% at 06:12 ET (10:12 GMT).
DHL shares traded at €37.20 at the time of the downgrade, leaving what the analysts described as “9% downside” from current levels.
The analysts said DHL’s shares had risen 12% year to date, outperforming European logistics and U.S. peers, despite earnings estimates for 2025 falling 7%.
“At 13x 2025E P/E, the shares trade in line with the historical average, which is increasingly hard to justify, in our view” the report said, adding that dividends provide support but share buybacks are at risk.
Earnings before interest and taxes are now forecast at €5.8 billion for 2025, 2% lower than previous estimates and 4% below consensus.
The 2026 EBIT forecast was cut 4% to €6.2 billion. “We now expect it to reach this target in 2028E (from 2027E previously),” the analysts said.
DHL’s Express division weighed heavily on the downgrade. Time Definite International volumes fell 10% year over year in the second quarter, with business-to-consumer shipments plunging 20% after the United States removed its de minimis exemption for low-value imports from China and Hong Kong.
The exemption was extended to the rest of the world in August, which DHL expects to shave as much as €200 million from 2025 EBIT.
“It is harder to adjust for all trade lanes into the US versus only the China/HK trade lane,” the analysts said, noting that these shipments had been more profitable.
The brokerage now forecasts a 10% drop in Express volumes in 2025 and no recovery in 2026. It lowered Express EBIT estimates to €2.96 billion in 2025 and €3.2 billion in 2026.
The analysts also flagged a reduction in demand surcharges for peak season shipments, estimating a potential 20% decline year over year.
Other divisions show limited offset. Supply Chain growth is slowing, and the Forwarding unit remains pressured by weaker ocean and air markets.
DHL’s forwarding EBIT dropped 27% in the first half of 2025, and its conversion ratio of 28% remains below the 35% medium-term target. The brokerage cut its 2025 and 2026 forwarding EBIT estimates to 10% and 5% below consensus.
The downgrade also cast doubt on DHL’s share repurchase program. While the group kept its dividend at €1.85 per share, implying a payout ratio above 60%, BofA warned that planned €1.5 billion annual buybacks may not be sustainable.
“Cash return of €3.7bn in 2025 and 2026 (including €1.5bn buyback) would exceed the FCF of €3.0bn,” the brokerage said, signaling a risk of cuts to repurchases.
Despite the pressures, DHL maintains a dividend yield near 5%, but the analysts concluded the shares could re-rate lower in the weak demand environment. “More cuts coming – new PO of €35 = 9% downside,” the brokerage said.