Reports Q2 2022 results on Thursday, December 16 after close
Expected Revenue: $22.41 Billion
EPS forecast: $4.27
Despite soaring e-commerce deliveries and growing sales, investors have given FedEx (NYSE:) the cold shoulder. Shares of the freight and logistics giant have fallen more than 18% in the past six months, significantly underperforming US benchmark indices. year than from Black Friday to Christmas in pre-pandemic 2019, and 10% more than during the record season of 2020 during COVID.
likely to hurt margins even if sales increase. That's what happened in the US, when the transportation company lowered its annual earnings outlook and missed analysts' quarterly earnings estimates.
Investors turned bullish on FedEx early this year, pushing the stock to an all-time high amid growing demand for the company's delivery services amid the pandemic as customers switched to e-commerce. Before COVID-19 spread around the world, the company had already moved to a seven-day service model, expanded capacity for larger packets, introduced new routing software and began pushing more Express packets into its cheaper ground network.
Those changes helped FedEx boost profits on a deluge of housing packages, while the more lucrative business delivery service suffered during the US lockdown. Going forward, the company's major challenge is to control costs in an environment where inflation and staffing shortages continue, hurting expansion plans and margins. September that a tight labor market, higher wages and reduced network efficiency resulted in $450 million in additional costs in the first quarter from a year earlier. Cost headwinds, which totaled $800 million, including capacity expansions during the first quarter, likely continued into the second quarter. the continued expansion of online shopping. Citi reiterated FedEx as a "buy" in a note last week, saying it sees a positive risk/reward bias. The note read:
"It's clear that investor sentiment has improved during F2Q22 thanks to more constructive comments from the company about workforce availability. With that in mind, we think F2Q results are likely to exceed consensus expectations and rise flat to sequential versus F1Q."
JPMorgan also reiterated that FedEx had been considered in its recent note to customers, saying:
“We are constructive on FDX in the F2Q22 earnings release on Dec. 16. After a brief rally that has lost momentum, the stock is trading at a near-record valuation discount for UPS, providing a decent margin of safety on a relative basis.”
Of the 31 analysts who cover the stock for Investing.com, 23 have given it an "outperform" rating.
Analyst consensus estimates polled by Investing.com. com
The consensus average price target among analysts polled by Investing.com is $305 – a potential target of 25% upwards from Tuesday's closing price of $240.17.
Bottom Line
Tomorrow's FedEx quarterly report may not be a positive surprise despite rising costs and labor shortages, but the company continues to grow strongly amid strong demand for e-commerce shipments. The current weak period for FDX stocks could soon reverse once these challenges are under control.
