While companies in most sectors suffered setbacks amid the COVID-19 pandemic, FedEx Corporation (FDX) managed to generate impressive returns, benefiting from the pandemic-driven surge in e-commerce demand. The stock has gained 123.9% over the past year and 12.2% over the past three months to close yesterday’s trading session at $299.30.
Its shares have more than doubled since hitting their 52-week low of $129.28 on June 26, 2020. As major economies gradually reopen, FDX is expected to witness even more demand for its products and services and its cross-border e-commerce technologies and e-commerce transportation solutions. Also, the company has been playing an important role in delivering COVID-19 vaccines, from which it is benefiting.
FDX has announced a 15% increase in its quarterly dividend from the previous $0.65 per share dividend to $0.75 per share, payable on July 12, 2021. The steep dividend increase reflects FDX’s sound financial position and commitment to rewarding shareholders.
Here’s what we think could influence FDX’s performance in the upcoming months:
Strategic Alliances
On June 15, 2021, FDX and Nuro announced a multi-year, multi-phase agreement to test Nuro’s next-generation autonomous delivery vehicle within FDX’s operations. The Nuro pilot is expected to expand FDX’s portfolio of autonomous same-day and specialty delivery devices.
The company also announced a new, multi-year collaboration with Adobe Inc. (ADBE) in April, beginning with the integration of ShopRunner with Adobe Commerce. Raj Subramaniam, FDX’s president and COO said, “With Adobe’s leadership in customer experiences, the ShopRunner platform and our digital and logistics intelligence, we can increase the competitiveness of brands and merchants and create new possibilities in e-commerce.”
Robust Financials
For the fiscal third quarter, ended February 28, 2021, FDX’s total revenue increased 23% year-over-year to $21.51 billion. Its total U.S. package revenue increased 14.2% year-over-year to $3.94 billion and its total freight revenue increased 19.3% from the same period last year to $2.07 billion. FDX’s non-GAAP net income came in at $939 million, up 153% year-over-year. The company’s non-GAAP EPS was $3.47, which represents a 146.1% year-over-year rise.
Impressive Revenue and EPS Estimates
Analysts expect FDX’s revenue to increase 23.5% for the about-to-be-reported quarter, ended May 31, 2021, and 19.7% in 2021. The company’s EPS is expected to increase 94.9% for the about-to-be-reported quarter, 89.2% in l 2021 and 12.5% in 2022. Also, its EPS is expected to grow at a 29.4% rate per annum over the next five years.
Consensus Rating and Price Target Indicate Solid Upside
FDX has a 1.5 average broker rating. Of 31 analysts that have rated the stock, 24 rated it ‘Strong Buy’ or ‘Buy.’ Furthermore, the stock is expected to hit $334.53 in the near term, which indicates a potential 11.8% upside.
POWR Ratings Show Promise
FDX has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. FDX has an A grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will increase significantly.
It has a B grade for Quality. This is justified given FDX’s trailing-12-month return on common equity and asset turnover ratio of 14.81% and 1.03%, respectively, which are higher than the 9.90% and 0.75% industry averages. The stock also has a B grade for Sentiment, in sync with favorable analyst sentiment.
FDX is ranked #4 of 16 stocks in the A-rated Air Freight & Shipping Services industry. To access FDX’s ratings for Stability, Value and Momentum as well, click here.
If you’re looking for other top-rated stocks in the same industry, with an Overall POWR Rating of Strong Buy or Buy, you can access them here.
Bottom Line
Package delivery giant FDX has not only benefited from a surge in e-commerce demand amid the COVID-19 pandemic, but it also delivered 1.35 million Johnson & Johnson (JNJ) vaccine doses to Mexico this month and delivered critical medical supplies and equipment to India last month. It is expected to witness increasing demand for its products and services as most economies gradually reopen. So, we think it is wise to add this stock to one’s portfolio now.
FDX shares were trading at $295.34 per share on Wednesday morning, down $3.96 (-1.32%). Year-to-date, FDX has gained 14.05%, versus a 13.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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