The Focal Point Of FedEx Earnings Strength Should Be Margins, Analysts Say

Analysts are out with reactions and price target changes after FedEx Corporation FDX reported strong quarterly earnings.

FedEx reported second-quarter earnings of $4.87 per share, which beat the analyst consensus estimate of $2.69. The company reported quarterly sales of $19.30 billion, which beat the analyst consensus estimate of $17.55 billion.

Margins The Highlight

“Results were a beat across the board, but we believe that the focus point should be the margin trajectory that was seen today and what we expect going forward,” Wells Fargo analyst Poliniak-Cusic wrote in a note. “FedEx achieved an aggregate incremental margin of 26% this quarter, and we believe this could be a base level assumption moving forward."

Poliniak-Cusic maintains an Overweight rating and raises the price target from $221 to $286.

“Express margin was the greatest driver of a massive upside first quarter report," said UBS analyst Thomas Wadewitz. "FedEx’s first quarter performance was so much better than expected it begs the question of whether the results can continue."

Wadewitz maintains a Buy rating and raises the price target from $218 to $320.

Skepticism Remains

“We remain skeptical that the long term structural headwinds that have long plagued parcels have suddenly abated,” said Morgan Stanley analyst Ravi Shanker. “We are unlikely to know if the bear case plays out until COVID conditions normalize... It is entirely possible that FedEx is setting itself up for one of the toughest comps in its history in fiscal year 2022.”

Shanker remains Equal-Weight and raises the price target from $110 to $250.

“As expectations ratchet up and comps become progressively difficult, we do not advocate chasing shares,” said KeyBanc analyst Todd Fowler. He maintains a Sector-Weight rating with no price target.

“We question, however, the sustainability of the positive trends in Express, which is benefitting from tight air cargo capacity, and we remain cautious around the outlook for Ground margins over the medium-term,” said BMO analyst Fadi Chamoun.

Chamoun maintains a Market Perform rating and raises the price target from $220 to $265.

FDX Price Action

Shares of FedEx are trading up 5.8% to $250.55. Shares hit a new 52-week high of $256.00 in early morning trading. Shares are up 57% year to date.