FedEx Corp (NYSE: FDX) announced its fiscal Q3 2022 earnings report for the quarter ended February 28, 2022, on Thursday 17, 2022, in which earnings missed estimates.
What to look for: The company performed exceptionally well in the third quarter thanks to the continued execution of its strategies. Operating income improved in Q3 due to net fuel benefit and high revenue per shipment in all transportation segments. Also, results benefited from low variable compensation expense and less severe winter weather relative to a year ago. However, the Omicron variant surge dampened the high operating income, resulting in disruptions to the company's networks and lowered customer demand from January through February.
Earnings: Stockearning’s Estimated EPS was $4.59 per share compared to adjusted EPS of $3.47 a year ago. Analysts had predicted earnings per share of $4.65 for Q2 2022. Net income during the quarter was $1.04 billion or $3.88 per share compared to net income of $1.23 billion or $4.55 per share. For the full fiscal year, the company expects earnings per diluted share to be between $18.6 and $19.6 per share compared to the previous range of $18.25 to $19.25 per share. Historical EPS performance shows that the company has in the past 12 quarters the company has topped estimates 19 times (52%) and missed 17 times (47%).
Revenue: The company announced revenue of $23.6 billion compared to $21.5 billion a year ago. Operating income was $1.33 billion versus $1.01 billion in Q2 2021.
Stock movement: FDX shares have lost 5.3% since the company released its last earnings release. Interestingly, following the earnings release, the company's shares have been DOWN 30 times in the past 47 quarters. So, the historical price reaction suggests a 52% probability of the share price going DOWN following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-5%, while the predicted volatility on the seventh day is +/-5%.
What analysts are saying: Wells Fargo analyst Allison Poliniak-Cusic lowered the stock's price target from $314 to $277 and maintained a Buy rating in the stock following earnings results. Poliniak-Cusic told investors in a research note that shares may fall on Friday due to persistent fears about FedEx's capacity to exploit the present volume and return environment.
Barclays analyst Brandon Oglenski slashed the firm's price target on the stock from $345 to $320 but maintained a Buy rating on the shares after fiscal Q3 results. Olenski told investors in a research note that the company experienced another hard quarter, but the maintained 2022 projection shows cost pressures are finally abating. At the forthcoming analyst meeting in June, management laid the foundation for mid-$20 earnings per share guidance in fiscal 2023 and closer to $30 in a few years' time, according to the analyst. He believes the stock has substantial objective upside if FedEx "can attain even just near-term targets."
Citi analyst Christian Wetherbee slashed the stock’s price target from $300 to $270 but maintained a Buy rating on the stock. In a research report, Wetherbee advises investors that ground profits are unlikely to get better compared to the past year as FedEx finishes out fiscal 2022. According to the analyst, management has moved away from double-digit forecasts in the 2H, and Q4 must be 12.5 percent or lower, making the math work. Wetherbee believes FedEx's risk/reward is "skewed positively" considering the stock's price and a probable investor day event in June.
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