Buy, Sell, Or Hold FedEx’s Stock At $158?

by Trefis Team
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Our price estimate for FedEx Corporation’s (NYSE: FDX) stock is $160, which is close to the current market price of around $158, thus having only a limited room for stock price growth, the stock seems close to fairly valued, in our view. Our price estimate of $160 for FedEx’s stock is based on expected fiscal 2020 earnings of $10.81 on an adjusted basis, and a price to earnings multiple of 14.8x. FedEx’s stock has seen over a 30% decline since November 2018, after the unexpected departure of FedEx Express CEO David Cunningham. The company’s business was impacted by trade tensions in 2019, and it also ended its contract with Amazon for deliveries, resulting in lower volume. As such, revenue in fiscal 2020 will also be impacted, and weigh on EPS.

FedEx is primarily involved in delivery of packages worldwide. Its services are used by retail customers and businesses to deliver documents, and goods. It covers 220 countries. It competes with other package delivery service providers, such as UPS, and DHL, among others. In this note we focus on estimating FedEx’s stock price. You can look at our interactive dashboard analysis on FedEx valuation for more details.

#1. Estimating FedEx’s Total Revenues:

  • Total revenues have increased from $50.4 billion in fiscal 2016 to $69.7 billion in 2019, and it will likely hover around the $69 billion mark in 2020.
  • Our interactive dashboard analysis, FedEx Revenues: How Does FedEx Make Money?, provides an in depth view of the company’s revenues.

#1.1 Comparing trends in FedEx’s total revenues with that of UPS in our FedEx valuation dashboard. 

#2. Deriving FedEx’s Adjusted Net Income:

  • Adjusted Net Income grew from $3.0 billion in fiscal 2016 to $4.1 billion in fiscal 2019, and we expect it to be around $2.8 billion in 2020.
  • This decline will likely be driven by lower revenues and lower adjusted net income, as the company posted higher adjustments in the prior fiscal due to mark to market retirement plan accounting.
  • Our interactive dashboard analysis, FedEx Expenses: How Does FedEx Spend Money?, provides an in depth view of the company’s expenses.

#3. Determining FedEx’s Adjusted EPS:

  • Adjusted EPS has grown from $10.81 in fiscal 2016 to $15.57 in fiscal 2019, and we estimate it to be $10.81 in fiscal 2020.

#4. Estimating FedEx’s Stock Price:

  • Our price estimate of $160 for FedEx’s stock is based on our Detailed Valuation Model, and implies 14.8x P/E Multiple on expected fiscal 2020 Adjusted EPS of $10.81.

#4.1 Comparing FedEx’s Historical P/E Multiple With That of UPS

  • P/E Multiples are based on Share Price at the end of year, and reported adjusted EPS for the full year (fiscal).
  • FedEx’s P/E Multiple of 11.4x in 2018 and 9.5x in 2019 has been lower than that of 14.1x and 15.3x for UPS during the same period.

See all Trefis Price Estimates and Download Trefis Data here

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