FedEx: Cost Cuts Paying Off, Big EPS Growth Expected (NYSE:FDX) (2024)

FedEx: Cost Cuts Paying Off, Big EPS Growth Expected (NYSE:FDX) (1)

Transportation stocks had been keeping pace with the strong S&P 500 through February this year. Market-watchers like to see this cyclical niche of the domestic equity market lead during bull markets to help confirm the uptrend. The iShares Transportation Average ETF (IYT) began to lose absolute and relative steam toward the tail end of Q1, however. It indeed portended a small correction in the S&P 500. One of the ETF’s largest components, however, bucked the trend.

Following a strong Q3 2024 report issued in March and with impressive growth forecasts in place, I have a buy rating on FedEx (NYSE:FDX). I see the $66 billion Air Freight and Logistics industry company as a compelling GARP play today.

FDX Leads the Transports ETF in 2024

According to Bank of America Global Research, FedEx Corp provides a portfolio of transportation, e-commerce, and business services under the FedEx brand. The company operates in four segments: FedEx Express (51% of revenues), FedEx Ground (36% of revenues), FedEx Freight (9% of revenues), and FedEx Services (3% of revenues). FedEx offers a variety of transport services to more than 220 countries, and it is a complete global service provider of transport and supply-chain solutions.

Back in March, FDX reported a solid set of third-quarter numbers. Q3 non-GAAP EPS of $3.86 handily topped estimates of $3.48, though revenue of $21.7 billion, down 2% from year-ago levels, fell shy of consensus. While the top line was soft, the firm’s cost savings program was the focus – a 13% y/y jump in net earnings puts the company on track to hit its $1.8 billion expense reduction goal from its DRIVE program in FY 2024. More margin-focused initiatives are planned for the years ahead.

Looking ahead, the management team narrowed its 2024 EPS target and noted that Express margins are expected to drop slightly this year while Ground margins should be positive. Freight margins may also inch lower from the percentage last year. The Wall Street reaction was very positive – shares jumped 7.4% during the following session. Right now, the options market has priced in a 4.8% stock price swing following the June earnings date while analysts expect $5.38 of operating EPS, which would be up 9% YoY.

On valuation, analysts at BofA see earnings having risen close to 20% this year (its FY 2024 is about to close) while per-share profits are seen rising at a solid pace through the out year and 2026. The current Seeking Alpha consensus forecast shows a similar growth trajectory, with operating EPS potentially topping $21 in the coming 12 months.

Revenue will likely come in lower from year-ago levels in 2024, but a positive inflection is expected over the coming two fiscal years. Dividends, meanwhile, are projected to rise to $5.40 next year and then hold steady. With a low EV/EBITDA ratio and solid free cash flow, the recent bumpy earnings ride may be about over.

FedEx: Earnings, Valuation, Dividend Yield, Free Cash Flow Forecasts

FDX has historically traded with a mid-teens multiple. Its 5-year average forward non-GAAP price-to-earnings ratio is slightly below that. If we assume $21 of operating EPS over the coming 12 months and apply a 15x P/E, then shares should trade near $315, making the Industrial sector stalwart undervalued today.

FDX: Favorable Valuation Metrics Considering EPS Growth Through FY 2026

Compared to its peers, FDX features a neutral valuation rating, while its recent growth trajectory has been weak. But with a cost-cutting program underway and a focus on margin strength, earnings are forecast to increase substantially by 2026.

As it stands, profitability trends are very strong, evidenced by an A+ Quant Factor Grade by Seeking Alpha, and EPS revisions from the sell side are coming around in a positive way. Finally, share-price momentum has been lacking, but I will detail some green shoots on the chart later in the article.

Competitor Analysis

Looking ahead, corporate event data provided by Wall Street Horizon show a confirmed Q4 2024 earnings date of Tuesday, June 25 with a conference call immediately after the numbers cross the wires. You can listen live here. No other volatility catalysts are seen on the calendar.

Corporate Event Risk Calendar

The Technical Take

Following strong Q3 2024 results back in March and with a decent valuation considering double-digit EPS growth ahead, can FDX deliver technically? I see reasons for optimism. Notice in the chart below that shares have traded with a pair of gaps in mind lately. First, the stock filled a downside gap from December 2023 with near precision in the wake of the earnings-related bump in March. But the stock then wavered, dropping from $291 to a low of $262 within a matter of weeks, filling the earnings gap.

Today, shares seem to have successfully defended a confluence of moving average support points. Both the short-term 50-day moving average and the long-term 200dma are just below $260 – the pair of trend indicators are rising, too. What’s more, a bullish golden cross pattern took place earlier this month, whereby the 50dma crossed above the 200dma. With these bullish factors in play, I see FDX lifting back towards its multi-year high of $291 in due time.

Bigger picture, there’s long-term support in the $210 to $217 zone and a large amount of volume by price from $192 up to $270 which should provide a cushion if we see a more pronounced pullback.

FDX: Minding the Gaps, Long-Term Support Holds

The Bottom Line

I have a buy rating on FedEx. I see the domestic large cap as undervalued with a very impressive growth outlook while its technical situation is solid.

Mike Zaccardi, CFA, CMT

Freelance Financial Writer | Investments | Markets | Personal Finance | RetirementI create written content used in various formats including articles, blogs, emails, and social media for financial advisors and investment firms in a cost-efficient way. My passion is putting a narrative to financial data. Working with teams that include senior editors, investment strategists, marketing managers, data analysts, and executives, I contribute ideas to help make content relevant, accessible, and measurable. Having expertise in thematic investing, market events, client education, and compelling investment outlooks, I relate to everyday investors in a pithy way. I enjoy analyzing stock market sectors, ETFs, economic data, and broad market conditions, then producing snackable content for various audiences. Macro drivers of asset classes such as stocks, bonds, commodities, currencies, and crypto excite me. I truly enjoy communicating finance with an educational and creative style. I also believe in producing evidence-based narratives using empirical data to drive home points. Charts are one of the many tools I leverage to tell a story in a simple but engaging way. I focus on SEO and specific style guides when appropriate. I am a contributor to WisdomTree Investments.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

FedEx: Cost Cuts Paying Off, Big EPS Growth Expected (NYSE:FDX) (2024)

FAQs

What is the earnings prediction for FDX? ›

FDX Earnings Forecast

Next quarter's earnings estimate for FDX is $5.06 with a range of $4.64 to $5.89. The previous quarter's EPS was $5.41. FDX beat its EPS estimate 75.00% of the time in the past 12 months, while its overall industry beat the EPS estimate 63.61% of the time in the same period.

What is the growth forecast for FedEx? ›

Future Growth

FedEx is forecast to grow earnings and revenue by 9% and 4.1% per annum respectively. EPS is expected to grow by 12.6% per annum. Return on equity is forecast to be 18.1% in 3 years.

What will FedEx stock be worth in 10 years? ›

FedEx stock price stood at $306.31

According to the latest long-term forecast, FedEx price will hit $350 by the end of 2024 and then $450 by the end of 2025. FedEx will rise to $500 within the year of 2027, $600 in 2028, $700 in 2030, $800 in 2032, $900 in 2034 and $1000 in 2036.

Is FedEx a good long term investment? ›

The company has generated cash flow growth of 3.6%, and is expected to report cash flow expansion of 9.7% in 2025. FDX should be on investors' short lists because of its impressive growth fundamentals, a good Zacks Rank, and strong Growth and VGM Style Scores.

What is the price target for FDX? ›

Stock Price Targets
High$360.00
Median$335.00
Low$215.00
Average$327.43
Current Price$307.43

What to expect from FedEx earnings? ›

Analysts are expecting earnings per share to come in at $5.34 on revenue of $22.076 billion, which equates to 8.1% and 0.6% year-over-year increases, respectively, according to TipRanks' data.

What is the highest FedEx stock has ever been? ›

Historical daily share price chart and data for FedEx since 1978 adjusted for splits and dividends. The latest closing stock price for FedEx as of July 22, 2024 is 307.43. The all-time high FedEx stock closing price was 313.52 on July 16, 2024.

Will FedEx stock rebound? ›

Is FedEx stock a buy? FedEx only sees revenue growing by "low-to-mid single-digit" percentages in fiscal 2025, an indication the company is not forecasting a quick rebound in demand.

What is the stock price forecast for FedEx in 2024? ›

According to the 25 analysts' twelve-month price targets for FedEx, the average price target is $314.00. The highest price target for FDX is $359.00, while the lowest price target for FDX is $215.00. The average price target represents a forecasted upside of 2.14% from the current price of $307.43.

Who owns the most stock in FedEx? ›

  • The Dodge & Cox Stock Fund (DODGX) The Dodge & Cox Stock Fund (DODGX) is the biggest fund holder of FedEx stock, owning about 10.8 shares for a market value of $1.6 billion at the end of September 2021. ...
  • The Vanguard PRIMECAP Fund Admiral Shares (VPMAX) ...
  • The Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

Should I buy UPS or FedEx stock? ›

While we expect both FDX and UPS to see small gains, the latter will likely fare better between the two. UPS' 11% average annual growth rate in the last three years is marginally better than 10% for FedEx. The revenue growth for FedEx was driven by e-commerce growth and better price realization.

What is the FedEx outlook for 2024? ›

Capital spending for fiscal 2024 was $5.2 billion, down 16% from $6.2 billion in fiscal 2023. During fiscal 2024, FedEx returned approximately $3.8 billion to stockholders through the combination of $2.5 billion of stock repurchases and $1.3 billion of dividend payments.

How high will FedEx stock go? ›

Based on short-term price targets offered by 25 analysts, the average price target for FedEx comes to $321.48. The forecasts range from a low of $215.00 to a high of $360.00. The average price target represents an increase of 4.85% from the last closing price of $306.62.

Is FDX a good investment? ›

FedEx stock has received a consensus rating of buy. The average rating score is and is based on 68 buy ratings, 29 hold ratings, and 1 sell ratings.

What is the future growth of FedEx? ›

FedEx has provided a positive outlook for FY 2025, forecasting revenue growth in the low- to mid-single-digit percentage range. The company expects full-year revenue to be between $94 billion and $97 billion, representing an increase of 6-10% compared to FY 2024.

Is Nike expected to beat earnings? ›

NKE stock is down over 9% in 2024, but the stock is rebounding from lows. Nike is expected to report an earnings-per-share (EPS) of $0.84 on $12.86 billion in revenue. Nike has exceeded EPS estimates handily the past three quarters but has had spotty revenue performance from quarter to quarter.

What is the potential for DKNG? ›

What is DKNG's upside potential, based on the analysts' average price target? DraftKings has 31.78% upside potential, based on the analysts' average price target. Is DKNG a Buy, Sell or Hold? DraftKings has a consensus rating of Strong Buy which is based on 24 buy ratings, 2 hold ratings and 0 sell ratings.

What is Monster Beverage earnings forecast? ›

What is MNST EPS forecast? MNST EPS forecast for the fiscal quarter 2024 (Q2) is $0.45.

What are the earnings expectations for DKNG? ›

Revenue Estimate
CURRENCY IN USDCurrent Qtr. (Jun 2024)Next Qtr. (Sep 2024)
No. of Analysts2726
Avg. Estimate1.11B1.05B
Low Estimate1.08B984M
High Estimate1.14B1.11B
2 more rows

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