You know the winds of change are blowing in the eurozone when the Italian Prime Minister makes fun of the German government's inability to sort out its banks. According to a report in The Wall Street Journal today, Matteo Renzi, in a TV interview late last month, said he was "sure" the German government "will do everything needed to prevent Deutsche Bank's (DB) crisis from worsening."
Still, not everything with "Deutsche" in its name is as bad as Germany's biggest lender, the shares of which have lost nearly 50% year to date (and which once again was pushing European stock markets down in early morning on Monday). One company that investors should take a closer look at is Deutsche Post (DPSGY) . The owner of DHL, the world's top logistics company by sales, is powering ahead with plans to adapt to the new, digitally dominated economy.
In a presentation in London last week, the company's representatives said it plans to accelerate its "footprint shift towards emerging markets" and "tap new market opportunities for organic expansion" to continue to deliver above-market growth.
Deutsche Post has highlighted e-commerce as its biggest growth driver. It plans to be a world leader in e-commerce-related logistics by 2020. The company has a big presence in the crucial markets where growth in online shopping is set to boost logistics companies: the U.S., Europe, China and India.
Its expansion strategy relies on organic growth, but also includes bolt-on acquisitions of companies complementing its existing operations and partnerships with local companies in the case of smaller markets.
It is not obvious at first sight, but the German logistics giant poses a direct threat to tech giants Amazon (AMZN) which is held in our Growth Seeker portfolio, and Google parent Alphabet (GOOGL) , which is held in the Action Alerts PLUS portfolio that Jim Cramer co-manages. Its program to deliver by drone is in very advanced stages, which presents an opportunity for tech-focused investors to take a look beyond the "usual suspects" in the field.
In its presentation, Deutsche Post said it is "paranoid" about innovation. Its Parcelcopter aerial drone delivery system, for example, has been tested since 2013 for instant delivery of medical goods. The company wants to make the process completely automated and is working on an interface that will give the consumer direct access to that system.
There are also reports that the company is building its own electric delivery van, rather than buying them from outside suppliers -- something that is said to be making car giant Volkswagen (VLKAY) livid with fury.
Given all the above, the stock's performance has not been that impressive. It has risen only by about 4% year to date in its main market, Frankfurt. But equity analysts believe in the company's prospects: "Buy" ratings dominate a list of 24 analysts' recommendations compiled by FactSet.
Google Finance data show the stock trading at a price/earnings multiple of more than 17x on the Frankfurt stock exchange. That's higher than its five-year average of 15.2x, but lower than last December's 20.4x. It has a dividend yield of around 3%.
The company's enterprise value/EBITDA ratio is 11.8x vs. the 11.4x average EV/EBITDA of the top five companies in its field. This indicates that, should it want to, Deutsche Post could go on an acquisition spree. It bought U.K. parcel delivery firm UK Mail last month for £242.7 million ($301.4 million), but it gave no indication that it is in the mood to go for bigger targets.
Although the company looks attractive, there are two big caveats. Investors looking at whether to buy the stock should be aware that although the company's sales have seen a five-year average CAGR of 2.8% and its EBITDA has increased by 2.3% in the period, diluted earnings per share have seen a fall of more than 10.3% in the same period, according to FactSet.
Still, analysts estimate that EPS at the end of 2016 will be €2.05, which would be 68% higher than last year's €1.22.
With interest rates at their lowest level in history, pension deficits are emerging as big headaches for a lot of companies. Increasing deficits could be a sign of slowing earnings growth as companies struggle to cover the pension scheme's funding needs.Deutsche Post has a pension plan shortfall of around €6.0 billion ($6.7 billion). That is lower than last year's €7.1 billion deficit, but is still a big number. Investors should keep an eye on it.