With an outlook to strong first-quarter results, logistics groups Kuehne + Nagel and DSV face a promising 2022, which could entail major growth via acquisitions for both companies, says analyst firm.
Despite Covid-19 continuing to affect global supply chains and Russia’s war in Ukraine, two of the logistics sector’s most profitable companies, Kuehne + Nagel and DSV, stand to deliver excellent results for the first quarter this year, and acquisitions could make the two players markedly larger in 2022, according to Bernstein analyst Alexander Irving.
Kuehne + Nagel will present its quarterly result Tuesday, with DSV following Wednesday, and analysts have already predicted that DSV is going to present its hitherto best Q1 result and possibly follow it up with an upgrade to the company’s full-year guidance.
The largest three forwarders – and shipping lines – are now all on the M&A train
ALEXANDER IRVING, BERNSTEIN
DSV isn’t just the logistics sector’s best performing company within sea and air freight with a profit margin exceeding 12 percent – the group is also heavily expanding through acquisitions, and both DSV and Kuehne + Nagel are expected to have a strong 2022.
”Among the forwarders, both Kuehne+Nagel […] and DSV […] should continue to see high unit gross profits and conversion rates from the ongoing disruption in airfreight and seafreight markets until 2023. Both are primed for good performance, and bullish commentary about the state of demand could support shares,” writes Irving in a memo on the developments in the logistics sector.
Acquisition ”explosion” to continue this year
He notes that the sector saw an ”explosion” in company acquisitions in 2021. This development is set to continue in 2022, and DSV is far from alone in having an appetite for buying up.
”The largest three forwarders – and shipping lines – are now all on the M&A train. In the 2010s, DSV was the only buyer in town for large forwarders as it integrated ABX and purchased and integrated UTi and Panalpina. However, in 2021, all three of the world’s largest international forwarding businesses engaged in M&A,” writes Irving.
In February last year, Kuehne + Nagel acquired air freight company Apex, April saw DSV take over company GIL, DHL acquired sea freight company JF Hillebrandt in August, Maersk took over air freight company Senator International in November, while December 2021 saw three major acquisitions: CMA CGM bought Ingram Micro, MSC acquired Bolloré Africa, and Maersk took over LF Logistics.
If the German government decides to put state-owned DHL up for sale, DSV or Kuehne + Nagel would have an opportunity to transform into the world’s largest freight forwarding business, according to Bernstein. However, it remains uncertain if DHL is going to be sold, Irving points out.
As for DSV’s earnings, analyst Mikkel Emil Jensen of Danish bank Sydbank has said he expects a record Q1 result and potentially an upward adjustment.
”We expect DSV to deliver yet another record result driven by excellent progress across its business, but, again, it will be high yields in the sea and air division that will mainly contribute to such solid earnings advancement,” he wrote on the upcoming financial report last week.
”An upgrade is very likely, but high geopolitical uncertainty could postpone the upgrade until later this year,” said Jensen in his assessment.
