FedEx Shows Mixed First Quarter Results; Stocks drop 5%
FedEx Corporation (FDX) posted mixed results for the first quarter due to a labor shortage due to the pandemic and supply chain disruptions. Following the news, shares fell 4.9% during the extended trading session on September 21.
The company reported adjusted earnings per share of $ 4.37, down 10.3% from the same period last year, and did not reach analysts’ estimates of $ 5 per share.
Revenue was $ 22 billion, up 14% from last year and slightly above Wall Street’s estimate of $ 21.91 billion.
During the quarter, the company recorded $ 450 million in additional labor market restrictions, which resulted in higher wages and transportation costs.
Commenting on the results, Raj Subramaniam, President and Chief Operating Officer of FedEx (FDX), said, “The FedEx team continues to work hard for our customers in an unprecedented and challenging environment. The current work environment reduces the efficiency of our networks and significantly affects our bottom line. During the upcoming peak season, service remains our priority, and we invest in resources and capacity to meet the needs of our customers.”
FedEx recently announced an increase in shipping rates for all branches and divisions of the company, effective January 3, 2022. FedEx Express, FedEx Ground, and FedEx Home Delivery rates will increase by an average of 5.9%, while FedEx Freight rates will increase by an average of 5.9% to 7.9%.
Due to current labor issues and an uncertain operating environment, FedEx cannot provide GAAP metrics for FY2022. While the company expects these hurdles to persist shortly, management expects gradual improvements in labor availability and proactive revenue management to enable the company to achieve profit growth in fiscal 2022.
For fiscal 2022, the company has lowered its estimates to reflect its first-quarter results. As a result, FedEx now projects adjusted earnings per share in the $ 19.75 to $ 21.00 range, a consensus estimate of $ 21.20 per share.
Recently, Robert W. Baird analyst Garrett Holland gave the stock a buy with a target price of $ 350, implying 38.9% upside potential.
In a preliminary income statement for the first quarter of fiscal 2022, Holland stated that investors underestimated the company’s higher relative growth (favorable e-commerce factor) and the opportunity to improve margins (pricing for packages with reinforced packaging, advantages of Track & Trace integration).
The analyst listed certain factors for his optimistic outlook on stocks, namely: a diverse portfolio of leading transport services, strong leadership in attractive markets, long-term growth in global parcels sent (could meet or exceed GDP growth), increased market share, operating leverage for FedEx Ground and additional opportunities in the freight transport sector.
In addition, Holland expects e-commerce to account for over 90% of total market volume growth through 2026, and he believes FedEx is well-positioned to capitalize on this accelerated growth trend.
As a result, the company’s shares receive an “Active Buy” rating based on 17 “Buy,” 3 “Hold,” and 1 “Sell” recommendations. In addition, FedEx’s average price target of $ 350.42 implies a 39% upside from current levels. The stock has been up 3.6% over the past year.
