FedEx (FDX) Earnings Breakdown: Software Stock Signals

Boasting a market cap of $70.72 billion, FedEx Corporation (FDX) offers transportation, e-commerce, and business services globally, operating through distinct segments such as FedEx Express; FedEx Ground; FedEx Freight; and FedEx Services.

With the company set to lift the curtains on its fiscal 2024 second-quarter results on December 19, 2023, would it be wise to take a bullish stance on the stock? Let’s understand it in detail.

FDX’s first-quarter results saw improvement primarily as a result of the successful execution of the company's DRIVE program initiatives and sustained emphasis on revenue quality. The company’s bottom line witnessed a 23%year-over-year growth. In addition, its ground segment experienced a 59% increase in operating income, primarily attributed to yield improvement and cost reductions.

Moreover, during the quarter, the company concluded a $500 million Accelerated Share Repurchase (ASR) transaction, resulting in the delivery of 1.95 million shares under the ASR agreement. The reduction in outstanding shares positively impacted first-quarter results, contributing $0.02 per share. FDX anticipates further repurchases of $1.50 billion in common stock throughout fiscal 2024.

Commenting on the first quarter results, Raj Subramaniam, the President and Chief Executive Officer of FDX remarked “We started fiscal 2024 with strong momentum as our global transformation actions take hold and drive improved results,”

Subramaniam further added that the company is well-positioned to continue delivering improved profitability while evolving into an even more flexible, efficient, and data-driven organization.

Meanwhile, in terms of price performance, FDX’s shares have surged 44% over the past nine months and 62.4% year-to-date to close the last trading session at $281.29.

Here are the financial aspects that could affect FDX’s performance in the near term:

Strong Financials

For the first quarter of fiscal 2024, which ended on August 31, 2023, FDX’s revenues amounted to $21.70 billion, while its operating income rose 25.2% from the year-ago value to $1.49 billion. Moreover, the company’s non-GAAP net income and non-GAAP EPS came in at $1.16 billion and $4.55, up 28.2% and 32.3% from the prior-year quarter, respectively.

Also, during the same period, FDX’s cash and cash equivalents stood at $7.06 billion, increasing 2.9% compared to $6.86 billion as of May 31, 2023.

Positive Analyst Forecasts

Analysts predict FDX’s EPS for the fiscal second quarter (ended November 2023) will increase 32% year-over-year to $4.20, while its revenue for the same quarter is expected to come in at $22.42 billion. Furthermore, the company has an excellent earnings surprise history, surpassing the EPS estimates in each of the trailing quarters.

Solid Historical Growth

Over the past three years, FDX’s revenue and EBIT have grown at CAGRs of 7.4% and 25.8%, respectively. In addition, the company’s net income and EPS have improved at CAGRs of 32.7% and 34.2% during the same period, respectively.

High Profitability

The stock’s trailing-12-month cash per share of $28.06 is significantly higher than the $2.14 industry average. Likewise, its trailing-12-month CAPEX/ Sales of 6.98% is 134% higher than the industry average of 2.98%. Furthermore, FDX’s trailing-12-month Return On Common Equity (ROCE) of 16.14% is 31.9% higher than the 12.23% industry average.

Discounted Valuation

In terms of forward non-GAAP PEG, FDX is trading at 1.11x, 36.6% lower than the industry average of 1.74x. Likewise, its forward Price/Cash Flow multiple of 7.72 is 45.1% lower than the industry average of 14.05. Furthermore, its forward Price/Sales multiple of 0.79 is 43.3% lower than the industry average of 1.40x.

POWR Ratings Exhibit Solid Prospects

FDX’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. FDX has an A grade for Sentiment, in sync with the positive analyst estimates for its to-be-reported quarter. Moreover, the stock’s B grade for Quality is justified by its higher-than-industry profitability.

Within the Air Freight & Shipping Services industry, FDX is ranked first out of the 15 stocks.

Beyond what we’ve stated above, we have also rated the stock for Growth, Value, Momentum, and Stability. Get all FDX ratings here.

Bottom Line

FDX stands out as a compelling investment opportunity, supported by its impressive financial performance in the last reported quarter, consistent historical growth, optimistic analyst estimates for the upcoming quarter, and high profitability. The added factor of an attractive valuation further solidifies its appeal as a sound investment choice.

How Does FedEx Corporation (FDX) Stack Up Against Its Peers? 

While FDX has an overall grade of A, equating to a Strong Buy rating, you may also check out these other stocks within the Air Freight & Shipping Services industry: Radiant Logistics, Inc. (RLGT), AerCap Holdings N.V. (AER), and ZTO Express (Cayman) Inc. (ZTO), with a B (Buy) rating. For exploring more Air Freight & Shipping Services stocks, click here.    

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

FDX shares were trading at $284.07 per share on Monday afternoon, up $2.78 (+0.99%). Year-to-date, FDX has gained 67.46%, versus a 24.89% rise in the benchmark S&P 500 index during the same period.

Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.

More...