(Reuters) -Logistics group Kuehne und Nagel International AG on Wednesday set 2026 targets above market expectations and said it expected positive growth trends this year, sending its shares up around 7%.
Despite a decline in fourth-quarter volumes, the Swiss freight forwarder said it expected positive growth and earnings trends seen over past several years to persist, although not at the "exceptional" levels of 2021 and 2022.
Freight forwarders such as Kuehne+Nagel and Denmark's DSV benefited from sky-rocketing freight rates during the pandemic, but falling global consumer demand, soaring inflation and high inventories have dragged rates lower.
The group targets average annual operating profit (EBIT) growth of 17% to 19% from 2019 levels and a conversion rate - the ratio of EBIT to gross profit - of 25% to 30% by 2026.
JPMorgan (NYSE:JPM) analysts said this implied an EBIT of 3.0 billion to 3.4 billion Swiss francs ($3.2 billion to $3.6 billion) by 2026, exceeding analysts' consensus by more than 50%.
The broker also noted the conversion rate was mainly driven by "company-specific factors".
Vontobel analysts said: "2026 targets materially above expectations imply substantial valuation upside".
Kuehne+Nagel, which operates in more than 100 countries, said the 2026 strategy aimed to boost organic growth and create a "sustainably higher conversion rate" across business divisions through digitalisation, among others.
Its conversion rate was 34% in 2022 versus around 13% in the years prior to the pandemic.
The company reported a 43% drop in fourth-quarter operating profit to 644 million francs as turbulence in commercial aviation impacted air freight capacity and complexity in ocean freight markets decreased.
Its annual operating profit increased by 28% to 3.76 billion francs.
($1 = 0.9378 Swiss francs)