5 FedEx Analysts Break Down Q4 Earnings: 'We Continue To See Upside Potential'

FedEx Corporation FDX traded lower by 4% on Friday after the company delivered lackluster fiscal fourth-quarter numbers on Thursday afternoon.

FedEx reported fourth-quarter adjusted EPS of $5.01, narrowly beating consensus analyst estimates of $5. Fourth-quarter revenue of $22.6 billion fell short of analyst expectations of $21.5 billion. Revenue was up 30% from a year ago.

The 30% revenue growth in the quarter was FedEx’s largest-year-over-year growth rate in more than a decade. FedEx has also demonstrated impressive pricing power in 2021, raising rates for many U.S. services by an average of 4.9% at the beginning of the year.

Looking ahead, the midpoint of the company’s updated full-year fiscal 2022 guidance was $21, ahead of analyst estimates of $20.63. The company reported $18.17 in fiscal 2021 EPS.

Labor shortages are one cause for concern for FedEx investors after the company reported a 23% increase in operating expenses in the quarter. Salaries and employee benefits also increased 21% in fiscal 2021.

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High Expectations For FedEx: Stephens analyst Jack Atkins said FedEx warned investors to anticipate an uptick in spending on its earnings call back in March.

“Expectations have risen sharply over the past month and while the 4Q results were essentially in line with sell-side expectations, our sense is that the buy-side anticipated a meaningful beat this quarter,” Atkins wrote.

Bank of America analyst Ken Hoexter said volumes and pricing exceeded expectations but were offset by a rising capex outlook.

“With FDX shares at 14.4x the mid-point of its EPS outlook, we continue to see upside potential for the stock as it completes its TNT integration and benefits from pricing,” Hoexter wrote.

Wells Fargo analyst Allison Poliniak-Cusic said FedEx is well-positioned for earnings growth through fiscal 2023.

“We're buyer's of [the] stock on weakness tomorrow, as we believe that expectations were too high for FY22 guidance, with investors anticipating +$22 (vs. guidance of $20.50 - $21.50),” Poliniak-Cusic wrote.

FedEx's Margin Outlook: Credit Suisse analyst Allison Landry said FedEx has a clear path to expanding Ground margins starting in fiscal 2022.

“The bottom line, in our view, is that domestic pricing leverage appears stronger than previously understood,” Landry wrote.

KeyBanc analyst Todd Fowler said he is encouraged by management’s commentary about the potential sustainability of Express margins.

“While guidance may be viewed as uninspiring when adjusting for various FY21 costs, we are encouraged with indications of Express margin sustainability, as well as healthy Ground yields and benefits from recovering B2B demand,” Fowler wrote.

FedEx Ratings, Price Targets: Bank of America has a Buy rating and $372 target.

Credit Suisse has an Outperform rating and raised the price target from $364 to $373.

Wells Fargo has an Overweight rating and $351 target.

Stephens has an Overweight rating and $360 target.

KeyBanc has an Overweight rating and $370 target.

Photo: Kevin McCoy/Wikimedia.