FedEx Guidance Was Lousy. Wall Street Is Fine With That.

Full-year guidance, however, was light. For the fiscal year running through May 2024, FedEx expects to earn between $16.50 and $18.50 a share amid an uncertain economic outlook. Analysts were projecting about $18.30 a share.

Analysts at Citi and Raymond James, however, both wrote Wednesday they still expect shares to rise after FedEx said it may be less profitable than expected in the coming year. Shares were down 3.2% to $224.23 in premarket trading Wednesday.

But the stock has bounced back some. Shares were only down about 1.6% in recent trading Wednesday. The
S&P 500
and
Dow Jones Industrial Average
were down 0.6% and 0.1%, respectively.

There are still positives from the earnings report. “FedEx appears on track to reach cost targets and we’re confident of structural reform,” said Citi analyst Christian Wetherbee in a note. 

Raymond James’ Patrick Brown said something similar in his report following earnings.

“Management’s shift toward integrating its Express and Ground offering, its focus on attacking costs across various buckets [and] enhanced capital allocation scrutiny…all set the stage to drive improved shareholder returns.”

Both those analyst rate shares the equivalent of Buy. J.P. Morgan analyst Brian Ossenbeck rates shares Hold. His price target is $251 a share, a little below Brown’s $270 mark and Wetherbee’s $285 target.

“The fiscal year 2024 guide is a reasonable starting point given all the crosscurrents,” wrote Ossenbeck. He says investors are waiting for volume growth to return to get more positive on the stock.

Volumes in both the express and ground businesses fell double-digits in percentage terms year over year for all of fiscal year 2023. The economy still isn’t great.

Still, at the midpoint of FedEx guidance, shares trade for about 13 times earnings. The S&P 500 trades for roughly 20 times estimated 2023 earnings. The lower valuation is one reason analysts aren’t too worked up by FedEx results.

Overall, 58% of analysts covering the stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $262 a share.

Write to Brian Swint at [email protected]