Declining Dutch Mail And Rising Costs Will Limit Upside

Key Takeaways

• Ongoing structural decline in core mail and rising labor costs are driving persistent losses and weak margins, limiting profitability and cash flow recovery prospects.
  
• Competitive and regulatory pressures, plus rising capex for sustainability, are constraining investment and threatening market share, further limiting growth and financial flexibility.
  
• Robust international expansion, pricing power, and operational efficiencies are driving growth, margin gains, and diversification away from traditional mail to mitigate domestic risks.

Catalysts

Provides postal and logistics services to businesses and consumers in the Netherlands, rest of Europe, and internationally.

• Persistent decline in core addressed mail volumes in the Netherlands is expected to continue outpacing cost-saving efforts, with the company forecasting Mail will remain loss-making at least through 2029; this structural decline will act as a drag on overall revenue and ensure chronically weak or negative margins for years ahead.
  
• Labor cost inflation across Europe is intensifying, and PostNL's recent results already show these organic cost increases are not being fully offset by pricing; this sustains pressure on both operating expenses and net profitability, especially since high fixed labor costs and legacy pension obligations will become even more burdensome as mail volumes shrink further and deliveries remain labor-intensive.
  
• The failure to secure promised government compensation or clarity on regulatory changes means PostNL must maintain an oversized and unsustainable legacy mail network without financial relief; this exposes the company to ongoing negative free cash flow, further equity write-downs, and limits the ability to invest in growth, ensuring financial metrics like normalized EBIT and free cash flow remain depressed.
  
• Increasing competition from global logistics giants (Amazon Logistics, DHL, DPD) combined with a shift to direct-to-consumer and platform-based delivery models threatens to erode PostNL's parcel market share, pressure pricing and margins, and undermine any top-line growth that might have been expected from e-commerce tailwinds.
  
• Tighter environmental regulation, rising carbon taxes, and required investment in sustainable delivery fleets will continue to raise capex and compliance costs at the same time as operating cash flow is constrained, putting additional pressure on net earnings and the ability to deliver dividends or reduce leverage in the medium term.

PostNL Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on PostNL compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming PostNL's revenue will grow by 2.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -0.5% today to 1.7% in 3 years time.
• The bearish analysts expect earnings to reach €60.4 million (and earnings per share of €0.12) by about August 2028, up from €-16.0 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 8.9x on those 2028 earnings, up from -30.6x today. This future PE is lower than the current PE for the GB Logistics industry at 19.6x.
• Analysts expect the number of shares outstanding to grow by 1.98% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.11%, as per the Simply Wall St company report.

PostNL Future Earnings Per Share Growth

Risks

• International parcels business is experiencing strong growth, especially in intra-European activities, supported by a 10% increase in international volumes and a 7% rise in Spring revenue, which could lead to higher top-line growth and improved earnings from greater scale and network effects.
  
• The company has been able to successfully implement targeted yield measures and regular price increases in the Parcels segment, resulting in a positive price/mix effect and demonstrating strong pricing power that could support margin growth and revenue resilience.
  
• There is ongoing investment in automation and process optimization, such as the full rollout of roll cage tilters and network rationalization, which helped reduce average cost per parcel and could lead to sustainable margin expansion and operating leverage over time.
  
• The out-of-home delivery strategy is gaining momentum, with increasing utilization rates and expansion through partnerships like Hoogvliet, potentially enhancing customer loyalty, driving recurring volumes, and creating more efficient delivery routes-favorable for both revenue growth and profitability.
  
• Strong focus on international growth and diversification away from legacy mail, including investments in cross-border e-commerce and the asset-light Spring segment, could mitigate domestic market pressures and lead to higher and more stable earnings in the long term.

Valuation

• The assumed bearish price target for PostNL is €0.77, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of PostNL'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 €1.2, and the most bearish reporting a price target of just €0.77.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €3.5 billion, earnings will come to €60.4 million, and it would be trading on a PE ratio of 8.9x, assuming you use a discount rate of 9.1%.
  
• Given the current share price of €0.96, the bearish analyst price target of €0.77 is 25.0% 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.