On Wednesday, UBS downgraded PostNL NV (PNL:NA) (OTC: PSTNY) stock from Neutral to Sell, adjusting the price target to €1.10 from the previous €1.35.
The firm cited structural challenges to the company's earnings before interest and taxes (EBIT) margin improvement and a limited ability to address its cost base as the main reasons for the downgrade. According to UBS, these factors are not fully recognized by the market, which could lead to further downside to consensus estimates.
PostNL is now facing a more bearish outlook from UBS, with a forecasted FY24E normalized EBIT of €82 million, which is at the lower end of the company's guidance range of €80-100 million. Additionally, UBS's projections for FY25/26E EBIT of €92 million/€100 million are approximately 22-26% below the consensus.
The downgrade comes amid UBS's assessment that the current market valuation of PostNL does not align with the fundamentals. The stock is currently trading at a 12-month forward enterprise value to EBIT (EV/EBIT) multiple of 10.8x.
This is considered a premium compared to its historical average of 7.7x and post-COVID average of 9.6x. UBS's analysis suggests that this premium is not justified given the company's financial outlook and structural challenges.
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