Citi raises DHL stock rating to buy, boosts price target to €48

Citi upgraded DHL Group (DHL:GR) to Buy with a price target of €48, up from €40, based on the underappreciated potential of its Express division. The upgrade is predicated on an expected recovery in daily time-definite international volumes, leading to a projected 2026 express EBIT margin of 13.4%, exceeding company consensus. Citi's 2026 EPS estimate is now €3.61, 5% above consensus, driven by the anticipated volume recovery and margin improvement, with the stock currently trading at a discount to its forward PE ratio.

Analysis

Citigroup analysts have upgraded DHL Group (DHL:GR) stock to 'Buy' from 'Neutral', concurrently raising their price target to €48 from €40. This revision is primarily driven by an anticipated recovery and re-evaluation of DHL's Express division, which constitutes a significant portion of the company's projected 2024 earnings. Citi's analysis indicates that the Express division's potential has been undervalued by the market, particularly following a decline in daily time-definite international (TDI) volumes since 2021. The analysts project a notable rebound, forecasting a 2026 express EBIT margin of 13.4%, which surpasses the company's consensus of 12.7%, and an adjusted 2026 earnings per share (EPS) estimate of €3.61, approximately 5% above current consensus. Supporting this positive outlook, Citi notes that DHL stock is currently trading at a valuation 1.5 standard deviations below its average forward price-to-earnings (P/E) ratio, suggesting an attractive risk/reward profile. However, it is noted that a separate AI-driven analysis by InvestingPro did not place DHL Group at the top of its list for massively undervalued stocks.

Key Decisions for Investors

• Investors may consider evaluating DHL Group as a potential investment, given Citi's upgraded 'Buy' rating, revised €48 price target, and the stock's current valuation discount relative to its historical forward P/E ratio.
• A critical factor to monitor will be the recovery trajectory of daily time-definite international volumes within DHL's Express division, as this is a cornerstone of Citi's projected EBIT margin expansion to 13.4% and EPS growth to €3.61 by 2026.
• It is advisable to weigh Citi's optimistic EPS and margin forecasts against the existing market consensus and other analytical perspectives, such as InvestingPro's assessment, before making investment decisions.