Fedex Corp. (FDX) has given up 100% of 2021 upside since May and is now trading at the same price level first struck in January 2018, more than 44 months ago. It’s also trading below the 200-day moving average for the first time since June 2020, highlighting a stomach-churning fall from grace after last year’s impressive 76% return. It’s no coincidence that selling pressure surged when the Delta variant exploded in the United States, forcing economists to lower 2021 GDP projections.
High Odds for Rally Into Year’s End
Fortunately for shareholders, the packaging giant’s fiscal Q1 2022 report next week offers a perfect opportunity for the stock to turn higher and enter a sizable fourth quarter recovery. Analysts predict the company will post a profit of $5.04 per-share on $21.84 billion in revenue. If met, earnings-per-share (EPS) will mark a 3.5% profit increase compared to the same quarter last year. Fedex fell 3.6% after June’s Q4 2021 report, despite beating estimates and raising fiscal year 2022 EPS above consensus.
BofA Securities remains highly bullish on the stock, posting a ‘Buy’ rating and $372 target. Analyst Ken Hoexter outlined his thesis, noting “We see significant tailwinds, led by pricing gains, margin improvement, continued e-commerce growth, and the return of B2B volumes. Its performance has been driven by robust volume growth, with Express and Ground average daily packages up +12% and +23% year-over-year. The company believes the pull-forward of e-commerce demand is unlikely to reverse post-COVID”.
Wall Street and Technical Outlook
Wall Street consensus stands at an ‘Overweight’ rating, based upon 22 ‘Buy’, 3 ‘Overweight’, and 7 ‘Hold’ recommendations. Notably, no analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $270 to a Street-high $397 while the stock enters the new trading week nearly $12 below the low target. This dismal placement should offer a perfect catalyst for buying pressure if Fedex meets or exceed estimates.
Fedex topped out near 275 in January 2018 and entered a decline that bottomed out at an 8-year low in double digits in March 2020. The subsequent uptick completed a round trip into the prior peak in October, yielding a breakout, followed by rangebound action that’s crisscrossed the contested level repeatedly in the last 11 months. Accumulation remains strong while relative strength readings hit oversold levels, marking a potent combination that favors higher prices in the fourth quarter.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.