FDX Stock: Should FedEx Stock Be Part of Your Portfolio In July 2022?
July 04 2022 - 6:46AM
Finscreener.org
FedEx Corporation (NYSE:
FDX) is one of the
largest logistics companies in the world. Based out of Tennessee,
it works through several segments and is the largest parcel
delivery service provider globally.
Its FedEx Express segment is into
the transportation of small packages and freight, while the FedEx
Ground segment indulges in day-certain delivery services to
businesses and residences. Other segments include the FedEx Freight
segment, the FedEx Services segment, and the Corporate, Other, and
Eliminations segment.
FedEx has been one of the
beneficiaries of the pandemic. Last year, capitalizing on the
increased delivery services during the pandemic, the stock
surpassed $300. But the rally was short-lived as FDX was adversely
impacted by supply chain issues, labor problems, and rising fuel
costs.
However, after the release of its
latest financials, FedEx stock got a big boost. The company has
gained almost 9% in the five days following its quarterly results
but is still down 13.5% year to date.
FedEx believes e-commerce has huge
prospects
As per The Business Research
Company, the
global e-commerce market
is expected to increase to $5.44
trillion in 2026 from $3.1 trillion in 2022, growing at a CAGR of
15.2% during the said period. FedEx is a leading player in this
growing e-commerce segment and can benefit significantly from the
incoming opportunities.
Three years back, FedEx had
decided to invest in expanding its e-commerce capacity and doubling
its operations. Now, there are opportunities for the company to
widen its focus on B2C through its acquisition of ShopRunne. This
two-day free shipping program can turn the company’s hundreds of
shipping partners into thousands in the coming times. FedEx has
also entered into a new multi-year agreement with
e-commerce seller
Boxed.
FedEx provides stronger than expected
guidance
FedEx recently released its
fourth-quarter
financials for fiscal 2022. It reported an adjusted EPS of
$6.87 per share along with quarterly revenue of $24.4 billion,
which was 8% higher compared to last year despite higher
transportation costs. Adjusted operating income also rose 13.2%
year over year to $2.23 billion driven by net fuel benefit across
all its segments coupled with lower variable compensation
expenses.
Notably, the company had boosted
its dividend payments by a whopping 53% to $1.15 per share.
Moreover, FedEx expects earnings between $22.45 and $24.45 per
share in fiscal 2023 as it aims to spend $6.8 billion to improve
efficiency by modernization of fleet and facility and increased
automation.
FedEx is also taking an active
part in reducing carbon emissions. The company had added TNT
Express into its trucking business already and this move can
provide it with meaningful synergies going
forward.
It has taken its first step
towards becoming an all-electric, zero-emission delivery fleet by
2040 with the
receiving of the 150
electric-delivery vehicles from General Motors
(NYSE:
GM) owned BrightDrop.
FedEx has ordered 2,500 electric trucks for its parcel and delivery
services and the full order is expected to be incorporated by the
next few years. Also, it has installed more than 500 charging
stations throughout California to boost its charging
infrastructure.
FedEx stock is currently priced
at $221 and the average analyst price target for the stock is
$301.38. That’s a potential upside of almost 35%.
With more people moving towards
online shopping, the earnings outlook of the company might continue
to improve. However, with the looming threat of a recession in the
market now, FedEx stock might not be a suitable buy for investors
with lower risk appetites.
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