FedEx (NYSE: FDX) is scheduled to report its fiscal Q4 2021 results on Thursday, June 24. We expect FedEx to likely post revenue and earnings below the street expectations. While the overall rebound in the economies across the globe likely aided the shipment revenues for its Express as well as Ground segments, which has benefited from increased online orders, higher operating costs likely impacted the overall earnings growth, in our view.
However, our forecast indicates that FedEx’s valuation is around $342 per share, which is roughly 20% above the current market price of around $285. Even if FedEx were to report below consensus earnings, we believe that the stock looks attractive at the current valuations. Our interactive dashboard analysis on FedEx’s Pre-Earnings has additional details.
(1) Revenues expected to be below the consensus estimates
Trefis estimates FedEx’s fiscal Q4 2021 revenues to be around $20.6 Bil, below the consensus estimate of $21.5 billion. FedEx over the recent quarters has seen an increase in demand for shipments, primarily led by a surge in e-commerce orders, as people preferred to stay in-doors, during the pandemic. While this primarily aided the company’s Ground segment revenues over the recent quarters, now with the gradual opening up of economies and large-scale vaccination drives, things are slowly returning to normal, and some of the people will eventually start heading out for shopping. As such, the growth levels in Ground shipments that the company has seen over the recent quarters, may not sustain in the long run. Looking back at fiscal Q3 2021, revenues grew a solid 23% to $21.5 Bil, with Ground segment seeing a sharp 37% y-o-y jump in revenues. Our dashboard on FedEx’s Revenues offers more details on the company’s segments.
2) EPS likely to be below the consensus estimates
FedEx’s fiscal Q4 2021 adjusted earnings per share (EPS) is expected to be $4.84 per Trefis analysis, 2% below the consensus estimate of $4.96. FedEx’s net income of $939 Mil in fiscal Q3 2021 reflected a large 2.5x rise from its $371 million figure in the prior-year quarter. This can be attributed to higher revenues and margin expansion, partly due to lower fuel costs. However, the company has seen an increase in operating costs over the recent past, and it may impact the overall earnings growth in the near term. On the positive side, the company has been levying surcharges to pass-on some of the increased costs to the customers. The latest round of increases in surcharge will be effective from today.
(3) Stock price estimate 20% above than the current market price
Going by our FedEx’s Valuation, with an EPS estimate of around $18.01 and a P/E multiple of 19x in 2021, this translates into a price of $342, which is roughly 20% above the current market price of around $285. While the 19x figure for FedEx is higher than the levels of 16x seen in 2018, the growth in FedEx’s P/E multiple is justified given the massive surge in earnings. For the nine months period that ended in February 2021, FedEx’s EPS stood at $13.17, reflecting nearly 2x growth from the $6.97 figure seen in the prior year quarter.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Earnings for the full year