Kuehne + Nagel Earnings: From the Highs of 2022 to the Lows of 2023

Renowned investor Howard Marks often describes markets as a pendulum that swings from one extreme to the other, rarely spending much time in the center. For narrow-moat Kuehne + Nagel KNIN, this phrase couldn’t be truer of market conditions. From the best year ever in 2022, we’ve now entered a period described by Kuehne’s CEO as “extremely challenging.” Revenue is down 37% year over year, and EBIT is down 45%. While we may tweak our estimates on the back of this update, we reiterate our CHF 196 fair value estimate. We believe the shares are currently overvalued.

Contract logistics and road, the smaller of the four businesses, together generating around one third of group revenue, held up reasonably well amid the decline in demand for global shipping. In the latter, despite a slight drop in revenue, high utilization rates drove EBIT to record levels. Despite the cutbacks by large retailers such as Amazon, the contract logistics business reported high utilization of warehouse space, driving EBIT more than 40% higher. On the negative side, however, the sea and air logistics businesses saw revenue plummet by more than 40% year over year, with EBIT levels in the latter falling by two thirds.

After a period of holding all the cards, 3PLs like Kuehne are now experiencing a rough patch, as the power balance shifts back to customers, at least in some part. This will mean a reversion to more normalized levels of operating profit over the next few years. That being said, Kuehne remains asset-light and thus nimble, and is well placed to weather the coming storm.