E-commerce Expansion And Automation Will Boost Parcel Efficiency

Key Takeaways

• E-commerce growth, international expansion, and pricing strategies are boosting revenue, operational efficiency, and driving broader margin improvement.
  
• Investments in automation and sustainability, along with strong ESG positioning, enhance resilience and support long-term profitability and market share.
  
• Structural losses in Mail and high reliance on few large Parcel clients, combined with regulatory and cost challenges, threaten earnings, margin stability, and future dividend capacity.

Catalysts

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

• Sustained growth in e-commerce volumes, particularly from international clients and large platforms/marketplaces, is increasing Parcel revenue and driving operational leverage, supporting future revenue and net earnings growth for PostNL.
  
• Positive price/mix developments through targeted yield measures and regular price increases are successfully offsetting rising operating costs, which is expected to enhance net margins over time as these measures are fully implemented.
  
• Investments in automation, out-of-home delivery, and new climate-neutral facilities are increasing operational efficiency and supporting margin expansion, while also aligning with heightened sustainability requirements, which should protect and boost future profitability.
  
• Expansion of cross-border parcel activities (notably the strong intra-European Spring business) is delivering high growth and supports further revenue diversification, reducing reliance on domestic demand and increasing resilience in long-term earnings.
  
• Rising consumer and regulatory focus on fast, reliable, and emission-free last-mile delivery continues to favor established providers with scale and ESG capabilities like PostNL, likely resulting in sustained market share among quality-conscious senders and improved higher-margin business mix.

PostNL Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming PostNL's revenue will grow by 2.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.5% today to 2.4% in 3 years time.
• Analysts expect earnings to reach €82.9 million (and earnings per share of €0.09) by about September 2028, up from €-16.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.3x on those 2028 earnings, up from -30.1x today. This future PE is lower than the current PE for the GB Logistics industry at 18.7x.
• Analysts expect the number of shares outstanding to grow by 2.35% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.16%, as per the Simply Wall St company report.

PostNL Future Earnings Per Share Growth

Risks

• Persistent and accelerating decline in traditional mail volumes, combined with government-mandated Universal Service Obligations (USO) that are structurally loss-making and will remain so at least through 2029, pose a major and ongoing drag on revenues and net margins, with political and regulatory uncertainty compounding the risk of continued Mail segment impairment.
  
• Delays and insufficient reforms to the Dutch postal regulatory framework, lack of government financial compensation, and high quality/coverage obligations lock PostNL into maintaining an unprofitable mail network, leading to recurring negative EBIT and ongoing risks to overall earnings and dividend capacity.
  
• Rapid client concentration in the Parcels business (i.e., growing dependence on a few large e-commerce and international players) reduces pricing power and increases competitive vulnerability; combined with intense price-based competition and rising last-mile cost pressures, this could compress parcel margins and limit sustainable net margin growth.
  
• Higher labor costs, ongoing wage inflation, and capital requirements for network automation, sustainability improvements, and international growth increase the company's exposure to margin squeeze if pricing and cost efficiency initiatives do not keep pace-threatening both near
• and long-term earnings.
  
• Limited international diversification (with operations heavily concentrated in the Benelux region) makes PostNL acutely vulnerable to Dutch and Belgian macroeconomic shocks, regulatory uncertainty, and political developments, resulting in heightened risk to revenue stability and EBITDA.

Valuation

• The analysts have a consensus price target of €0.97 for PostNL based on their expectations of its future earnings growth, profit margins and other risk factors. 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 €0.8.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €3.5 billion, earnings will come to €82.9 million, and it would be trading on a PE ratio of 8.3x, assuming you use a discount rate of 9.2%.
• Given the current share price of €0.95, the analyst price target of €0.97 is 2.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.