FedEx Corporation (FDX) provides transportation, e-commerce, and business services through companies competing collectively and operating independently under the FedEx brand. It operates through FedEx Express; FedEx Ground; FedEx Freight; and FedEx Services segments.
Despite the challenges of surging inflation and persistent supply-chain issues, FDX managed to improve its earnings and revenue. The company also has an optimistic outlook for the next year.
FDX has given a 2023 EPS guidance of $22.50 to $24.50. Baird analyst Garrett Holland in a note, said, “The strong FY23 EPS outlook underscores management’s confidence in executing on revenue quality, margin expansion, and capital allocation priorities.”
The company announced a quarterly cash dividend of $1.15 per share, increasing more than 53% from the prior dividend. FDX’s four-year average dividend yield is 1.33%, and its current dividend translates to a 1.91% yield. Over the last three years, its dividend payouts have grown at a 9.3% CAGR.
FDX looks undervalued at the current price level. In terms of forward non-GAAP PEG, FDX's 0.87x is 33.6% lower than the 1.32x industry average. Its forward non-GAAP P/E of 10.49x is 32.3% lower than the 15.49x industry average. Also, the stock's 12.11x forward EV/EBIT is 12.8% lower than the 13.89x industry average.
The stock has lost 7% in price year-to-date and 17.6% over the past year to close the last trading session at $240.47. It is currently trading 20.5% below its 52-week high of $302.65, which it hit on July 13, 2021.
Here’s what could influence FDX’s performance in the upcoming months:
Robust Financials
FDX’s revenue increased 11.3% year-over-year to $93.5 billion for the fiscal year ended May 31, 2022. The company’s non-GAAP operating income increased 11.1% year-over-year to $6.87 billion. In addition, its non-GAAP net income increased 12.4% year-over-year to $5.50 billion. Also, its non-GAAP EPS came in at $20.61, representing an increase of 13.4% year-over-year.
Favorable Analyst Estimates
FDX’s revenue for fiscal 2023 and 2024 is expected to increase 5.3% and 3.3% year-over-year to $98.47 billion and $101.70 billion, respectively. In addition, its EPS for fiscal 2023 and 2024 is expected to increase 10.8% and 10.5% year-over-year to $22.83 and $25.22, respectively.
High Profitability
In terms of trailing-12-month return on common equity, FDX’s 15.58% is 8.8% higher than the 14.31% industry average. Likewise, its 7.23% trailing-12-month Capex/S is 150.5% higher than the industry average of 2.89%. In addition, its 1.11% trailing-12-month asset turnover ratio is 38.9% higher than the 0.80% industry average.
POWR Ratings Show Promise
FDX has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. FDX has a B grade for Quality, in sync with its high profitability.
FDX is ranked #4 out of 17 stocks in the Air Freight & Shipping Services industry. Click here to access FDX’s Growth, Value, Momentum, Stability, and Sentiment ratings.
Bottom Line
FDX has guided improved results for fiscal 2023 despite the present macroeconomic and supply-chain headwinds. Also, the company announced a more than 50% increase in its quarterly dividend. Given its robust financials, favorable analyst estimates, and higher-than-industry profitability, investors could look to buy the stock at the current discounted valuation.
How Does FedEx Corporation (FDX) Stack Up Against its Peers?
FDX has an overall POWR Rating of B, equating to a Buy rating. You might want to consider investing in the following Air Freight & Shipping Services stocks with an A (Strong Buy) and B (Buy) rating: Universal Logistics Holdings, Inc. (ULH), Kuehne + Nagel International AG (KHNGY), and United Parcel Service, Inc. (UPS).
FDX shares were trading at $247.59 per share on Tuesday morning, up $7.12 (+2.96%). Year-to-date, FDX has declined -3.46%, versus a -16.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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