FedEx stock experienced a resurgence during the market’s coronavirus comeback, but it has lost some steam in the last several months and rests roughly 10% off its early December 2020 records heading into the release of its Q3 fiscal 2021 earnings results on Thursday, March 18.
Shipping is Never Going out of Style
FedEx is a global shipping powerhouse that pulled in $69 billion in FY20. The company is committed to boosting its e-commerce business, which includes investing in and optimizing its last-mile residential deliveries.
FDX cut ties with Amazon in the summer of 2019. Wall Street appeared somewhat perplexed at the time, but FedEx understood Amazon’s ambitions, and began to focus on its rivals like Target and Walmart. The company is expanding its digital commerce and business-to-consumer segments, while also remaining focused on its business-to-business unit.
The Tennessee-based firm has beefed up its automation efforts and is modernizing its Express air fleet. It also completed in late December its purchase of e-commerce platform ShopRunner that aims to directly connect brands and merchants with online shoppers.
FedEx remains committed to its business-to-business segment, but e-commerce is where the growth will come from for years. The booming industry only accounts for roughly 15% of total U.S. retail sales, or around 20% excluding autos and gasoline. This gives it plenty of runway and FedEx executives see room for big growth in the international e-commerce market.
FedEx executives last year cut their timeline for overall industry
expansion, as the coronavirus pushed e-commerce adoption into overdrive. FDX projects the overall U.S. market will reach 100 million packages per day by calendar year 2023, down from its pre-Covid projection of 2026. FDX expects that 96% of this anticipated growth will come from e-commerce.
FDX topped our second quarter FY21 estimates in December, with revenue up 19%. This topped Q1’s 13% revenue growth and represented its strongest expansion since fiscal 2017. Peeking ahead to its upcoming results, Zacks estimates call for its Q3 revenue to pop 14% to reach $19.9 billion and help lift its adjusted earnings by a whopping 128%.
FedEx is expected to post similarly impressive top and bottom-line growth in the fourth quarter to help lifts its full-year revenue by 15% to $79.5 billion. Meanwhile, its adjusted FY21 EPS figure is projected to surge 83%. FedEx is then expected to follow up this growth with another 5% sales expansion in FY22 and 9% EPS growth.
FDX has experienced some downward earnings revisions recently to help it land a Zacks Rank #3 (Hold). That said, its outlook is still up big since before its Q2 report and it’s topped our bottom-line estimates by an average of 63% in the trailing three quarters. FDX also rocks “A” grades for Growth and Value in our Style Scores system.
FDX has crushed its industry and the market in the past year, with the stock up 145%. The stock’s 2020 run helped it surpass its previous 2018 records in October. Yet, as we mentioned up top, FedEx has slipped in the last several months and at $269 a share, it trades 10% below its December records.
Luckily, its stock price is heading back in the right direction, up 14% since the end of January. FDX is also trading in line with its own one-year median in terms of forward sales and earnings and at a huge discount to its industry. On top of that, FDX’s dividend is yielding 1% at the moment and 14 of the 20 broker recommendations Zacks has come in at “Strong Buys,” with none below a “Hold.”