FedEx Corp’s shares rose over 4% in extended trading on Thursday after the delivery firm reported better-than-expected earnings in the fiscal third quarter, largely driven by strong volume growth in U.S. domestic residential package due to the ongoing COVID-19 pandemic.
The Memphis, Tennessee-based multinational delivery services company said adjusted net income surged more than 150% year-on-year to $939 million, or $3.47 per share, in the fiscal third quarter ended February 28. That was above Wall Street’s consensus estimates of $3.30 per share. FedEx said its revenue rose 23% to $21.5 billion during the period.
FedEx expects adjusted earnings of $17.60 to $18.20 per share for fiscal 2021, above the market expectations of $17.40. The company also added that continued strong earnings growth expected in the fiscal fourth quarter.
Following this upbeat result, FedEx shares, which surged more than 70% in 2020, rose over 4% in extended trading on Thursday.
“FedEx reported the strongest February quarter in its history as a strong peak shipping season and higher prices led to a 23% increase in revenue. The company continues to see strong momentum as B2B is improving and e-commerce is growing. We believe these shares can trade higher as pricing is likely to remain strong through at least this calendar year,” noted Helane Becker, Managing Director at Cowen and Company.
“We are reiterating our Outperform rating on the common shares of FedEx Corp. We are maintaining our $335 price target, which is based on 17.4x our FY22 EPS estimate. Shares of FedEx traded higher in the after-hours session as volume and yield trends drove revenue and EPS above expectations, even on lower margins; Express margins came in below our estimate while Ground margins were ahead. Earnings were helped by a lower than the expected tax rate, 15% vs our estimate of ~21%. This added $0.23 / share to EPS. We expect the shares should react favorably following the company’s full fiscal year guidance, which is above the consensus estimate (excluding year-end adjustments).”
FedEx Stock Price Forecast
Ten analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $332.25 with a high forecast of $356.00 and a low forecast of $305.00.
The average price target represents a 26.09% increase from the last price of $263.51. Of those ten analysts, eight rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.
Morgan Stanley gave the base target price of $250 with a high of $400 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Overweight” rating on the delivery services company’s stock.
Several other analysts have also updated their stock outlook. FedEx had its price target raised by Credit Suisse Group to $351 from $350. The firm currently has an outperform rating on the shipping service provider’s stock. UBS Group increased their price target to $380 from $320 and gave the stock a buy rating.
Moreover, the Goldman Sachs Group set a $356.00 price objective and gave the company a buy rating. Zacks Investment Research upgraded FedEx from a hold rating to a strong-buy rating and set a $286.00 price objective.
“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS,” said Ravi Shanker, equity analyst at Morgan Stanley.
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