FedEx to Beat Q3 Earnings Estimates; Buy With Target Price $323

U.S. delivery firm FedEx Corp is expected to report a profit of $3.35 in the fiscal third quarter, which represents year-over-year growth of over 137% from $1.41 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the Memphis, Tennessee-based multinational delivery services company has delivered an earnings surprise of over 36%. FedEx is also expected to post year-over-year revenue growth of over 13% to around $20 billion during the quarter.

FedEx shares, which surged over 70% in 2020, has but it has lost some steam and rose just about 1% so far this year. At the time of writing, the shares were 0.9% higher at $263.1 on Wednesday.

Analyst Comments

“We expect a modest beat for F3Q21 as peak-season momentum exiting 2020 should help offset a few cost headwinds. However, both numbers and expectations face tough comps and receding momentum in FY22, which will be challenging to overcome,” Ravi Shanker, equity analyst at Morgan Stanley.

“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 (14x PE) on current EPS.”

FedEx Stock Price Forecast

Eighteen analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $323.40 with a high forecast of $356.00 and a low forecast of $250.00.

The average price target represents a 23.30% increase from the last price of $262.28. Of those 18 analysts, 13 rated “Buy”, four rated “Hold” and one 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 “Equal-weight” rating on the delivery services company’s stock.

Several other analysts have also updated their stock outlook. FedEx had its price target trimmed by Credit Suisse Group to $350 from $368. 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 are reiterating our Outperform rating on the common shares of FedEx Corp. We maintain our price target of $335, which is based on 17.6x our FY22 EPS estimate. FedEx reports 3QFY21 results AMC on Thursday, March 18 with a call scheduled for 5:30 PM ET (webcast). Our focus for the call is: 1) Pricing durability, 2) Recovery of B2B volumes, 3) Density improvements and margin outlook, 4) Impact of vaccine distribution on the supply/demand dynamic,” noted Helane Becker, Managing Director at Cowen and Company.

We think it is good to buy at the current level and target $323 in the long-term as 150-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

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