No surprises in DSV's Q3 results - focus remains on DB Schenker acquisition

Today's third-quarter results from DSV (CSE:DSV) were eagerly anticipated after the recent sharp share price increases following the announcement of the acquisition of DB Schenker. With revenue of DKK 44 billion and growth of 25%, today's results exceeded expectations. Revenue was driven by higher volumes across all three divisions and higher ocean freight rates.

Despite the strong revenue, we see signs of weakness in the operating margin, which is under pressure from increased competition and rising costs. Although margin pressure was expected after a strong 2023, it may disappoint investors that the margin declined more than expected and across all divisions. The overall margin came in at 10% in the third quarter, down from 12% the year before and below expectations of around 11%.

An upward revision of expectations for 2024 was not on the table at the presentation, as management had already raised the lower limit for operating income to the DKK 16-17 billion range earlier this month, from the previous DKK 15.5-17 billion. Investors had already reacted to this adjustment with a price increase on the day, so there was no further uplift today.

All in all, no big surprises, which is also reflected in today's flat price development. In light of the huge acquisition of DB Schenker, which will almost double their revenue, a single quarterly report also suddenly carries much less weight.

Today's results do not change the overall positive story around the acquisition of DB Schenker, which remains at the centre of investor attention. Many had hoped for more details about the transaction, but didn't really get anything new this time around.

With the recent approval from the seller, Deutsche Bahn and the German state, and a successful share issue of DKK 37 billion, DSV is now one step closer to completing the acquisition. The transaction is expected to close early in the second quarter of 2025, with the next step being final approvals from the competition authorities. Given the fragmentation of the market, where DSV, despite its new status as the world's largest freight forwarder, only achieves a market share of 7%, and with the German state as the seller, the approvals are expected to go through. However, if there are still challenges in completing the transaction, it could roll back some of the 20% share price increase we've seen since the announcement.

It also means that the stock could remain in a vacuum for the time being, trading sideways while investors await more details about the acquisition.

eToro Nordic Market Analyst, Jakob Christensen