Earnings and volume gains, led by AI-related air freight demand and ongoing cost controls, spurred strong third-quarter results for Kuehne+Nagel, beating analysts’ estimates for profit and volumes.
Revenue increased 22% to $8.97 billion and pre-tax earnings were $527 million, up 53% year over year, the Swiss logistics giant reported last week.
The air and ocean forwarding business outperformed by picking up more business from Chinese retail marketplaces and hyperscalers, taking away market share from competitors in the process. Management also said that its cost savings initiative is moving faster than originally anticipated, with annualized savings of $242 million by year’s end. Better productivity has helped turn increased gross profits into operating profit at a rate of 18.2%, up from 13.4% a year ago.
Based on the nine-month results, Kuehne+Nagel (SWX: KNIN) raised its full-year outlook for earnings before interest and taxes to $1.88 billion at the midpoint range.
K+N said air cargo volume growth accelerated 7% quarter over quarter and 10% year over year, significantly exceeding overall market growth of about 6% from last year. Air logistics revenue was $2.88 billion, up 38% year over year. EBIT grew 84% during the quarter and is up 35% year-to-date.
Market share capture accounted for about 60% to 70% of the volume outperformance. Demand for logistics solutions supporting cloud infrastructure and semiconductor customers was a key growth driver, with general cargo also strong. A large share of air volume growth came via dedicated freighter aircraft.
K+N’s commentary dovetails with data and anecdotal evidence from airlines and logistics providers experiencing huge demand for high-tech shipments.
Executives said they expected to see further volume gains during the peak season, especially in higher-yielding segments.
K+N’s product mix in air cargo is changing. As high-tech shipments begin to dominate, volumes from automakers in Europe have fallen in recent years. And lightweight e-commerce volume fell significantly during the quarter, CEO Stefan Paul said during a briefing for analysts. Global e-commerce traffic has been impacted by new European Union customs fees and the introduction of tariffs for low-value goods in the United States in the past 18 months.
K+N continues to invest in cold chain capabilities for pharmaceutical customers. In September, K+N opened a 37,700-square foot healthcare logistics facility at Frankfurt Airport in Germany, expanding its ability to handle temperature-sensitive pharmaceutical and healthcare products.
Earlier this year, K+N established a so-called “cool corridor” between Frankfurt and Atlanta using a dedicated Boeing 747-8 freighter operated on its behalf by Atlas Air. The corridor concept is based on providing direct flights on the logistics company’s own-controlled aircraft, with sophisticated refrigerated warehouse facilities on each end of the route to give shippers faster, more reliable transport for specialized products than available by booking through for-hire commercial airlines.
The new facility is located within a large K+N warehouse at Frankfurt airport, which offers direct tarmac access and quick transfer times to-and-from cargo handling areas to minimize exposure to temperature changes. It can hold products at cool, refrigerated and frozen conditions.
Why It Matters: K+N is the largest freight forwarder by gross revenue in the world.
Ocean freight
The ocean shipping business returned to growth during the quarter, with EBIT up 55% after falling 11% in the first half since the end of last year. Volumes increased 5% year over year and 6% sequentially.
Results were driven primarily by market share gains on Asia outbound to the United States as the company made inroads with China-based exporters and in the transatlantic, thanks to a recovery in U.S. import demand.
“We decided roughly a year ago to invest into these new multinational customers coming from China. All of them want to become global and they need support with their uplifts into the markets, whether it is Europe, whether it is Latin America, but as well to a certain degree, of course, outside of the automotive industry, to the U.S.,” Paul said.
It will take two or three years to fully implement all the new master service agreements, which means revenue from this market segment will continue to grow, he added.
K+N expects ocean yields to hold stable at elevated levels through the first quarter of 2027, an outlook that TD Cowen analyst Jason Seidl said in a note was also expressed by DHL Forwarding management in a recent meeting.
K+N contract logistics revenue and pre-tax earnings increased 9% and 7%, respectively, with growth primarily in Europe and the Middle East. The company said it struck deals for 37 new contracts during the quarter, which will result in future revenue gains. Trucking profits increased 40% on stable demand in North America and Europe.
K+N has set a goal of $1.2 billion in revenue from its new long-term logistics deal with Amazon to support construction and operation of data centers, with air, ocean, road and contract logistics divisions all contributing support, Paul said.
In September, K+N inaugurated a new Tech Center in Chennai, India, expanding its global engineering footprint and its ability to develop and scale proprietary digital logistics solutions used to optimize customer supply chains at a time when digital capabilities have become a differentiator in the logistics market. Chennai was selected because of its highly skilled engineering talent and business ecosystem. The company said it expects to hire about 250 tech workers by early 2027 to work on the core digital forwarding platform for managing air and ocean shipments and other projects.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.
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