Austrian Mail Decline And Labor Pressures Will Stifle Outlook

Key Takeaways

• Persistent declines in mail volumes and high, inflexible labor costs are placing sustained pressure on margins and undermining long-term earnings stability.
  
• Rising competition, higher automation costs, and limited scale expose the company to market share losses and lower returns in the logistics sector.
  
• Expansion of e-commerce, automation, international growth, bank turnaround, and strong ESG initiatives collectively underpin stable earnings, efficiency gains, and resilience against market shifts.

Catalysts

Provides postal and parcel services in Austria, Germany, Southeast and Eastern Europe, Turkey, Azerbaijan, and internationally.

• The accelerating digitization of communication in Austria and across Europe is causing a persistent, high-single digit decline in core letter mail volumes, with management now expecting volume declines of about 7% for the foreseeable future. This entrenched structural headwind will continue to erode a major revenue stream while fixed costs remain high, leading to lasting pressure on both top-line and net margins.
  
• Ongoing growth of e-government services and increased remote work are further reducing demand for paper-based and physical delivery, especially in B2B and public sector segments, sharply accelerating the secular decline in mail revenue and undermining long-term earnings stability.
  
• High and inflexible labor costs-driven by union agreements and public-sector legacy payroll obligations-are constraining the company's ability to flex its cost base in response to falling mail volumes and intensifying competitive pressures, which will likely squeeze EBITDA margins even as revenue contracts.
  
• Intensifying competition from global logistics giants and new, tech-driven e-commerce logistics entrants is driving price wars and margin compression in the growing parcel and logistics sector, with Austria's market becoming more saturated and larger players gaining further scale advantages. Over time, this trend is expected to put further downward pressure on profits, offsetting volume growth in parcels.
  
• Increased automation and digitalization requirements in delivery and logistics are raising capital intensity for industry incumbents. Österreichische Post, with comparatively limited scale and international diversification versus larger European rivals, faces a long-term risk of under-investment and technological lag, raising the likelihood of market share erosion and lower long-term returns on invested capital.

Österreichische Post Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Österreichische Post compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Österreichische Post's revenue will grow by 3.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 4.2% today to 4.6% in 3 years time.
• The bearish analysts expect earnings to reach €156.2 million (and earnings per share of €2.32) by about August 2028, up from €129.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 13.1x on those 2028 earnings, down from 15.2x today. This future PE is lower than the current PE for the GB Logistics industry at 15.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.8%, as per the Simply Wall St company report.

Österreichische Post Future Earnings Per Share Growth

Risks

• Sustained growth of e-commerce and continued expansion of Asian platforms such as Temu and Shein into Europe are expected to drive higher parcel volumes, which could lead to steady or increasing revenue for Österreichische Post in the logistics and parcels segment.
  
• The company's ongoing investments in automation, technology, and self-service infrastructure aim to boost operational efficiency, lower long-term costs, and enhance margins, supporting improved profitability over time.
  
• International expansion into growth markets like Turkey, Azerbaijan, Georgia, and Uzbekistan provides diversification and additional revenue streams beyond the mature Austrian domestic market, which could offset any weakness in domestic mail.
  
• The successful turnaround and breakeven of bank99, with positive contributions to earnings and awards for customer service, suggest that the Retail & Bank division could become a stable source of earnings and revenue growth.
  
• Commitment to ESG and electrification, with more than 50% of the delivery fleet electric and a roadmap toward CO2-free delivery, positions the company advantageously for regulatory changes and could reduce future cost burdens while strengthening brand value and attracting sustainability-focused customers, ultimately supporting earnings.

Valuation

• The assumed bearish price target for Österreichische Post is €25.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Österreichische Post's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €33.7, and the most bearish reporting a price target of just €25.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €3.4 billion, earnings will come to €156.2 million, and it would be trading on a PE ratio of 13.1x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of €29.1, the bearish analyst price target of €25.0 is 16.4% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.