FedEx Crushes 1Q Estimates; Shares Soar 8.3%

Shares of FedEx Corp. jumped 8.3% in Tuesday’s extended market session, after the delivery company crushed 1Q profit and revenue expectations aided by strong shipping volumes during the Covid-19 pandemic. The delivery and logistics company reported 1Q adjusted earnings of $4.87 per share, surpassing analysts’ estimates of $2.70. Its revenues of $19.3 billion also exceeded the Street consensus of $17.6 billion.

FedEx’s (FDX) CEO Frederick Smith said “Operating results increased due to volume growth in FedEx International Priority and U.S. domestic residential package services, yield improvement at FedEx Ground and FedEx Freight, and one additional operating weekday.”

These factors were partially offset by higher costs to support demand and expand services, compensation expenses and Covid-19 related costs, the company said.

For FY21, the company expects capital spending to be “up $200 million to $5.1 billion, driven by additional capacity initiatives to support increased volume levels.” FedEx’s CFO Alan B. Graf said “While business demand improved in the first quarter, continued uncertainties cloud our ability to forecast full-year earnings.” Graf, however, expects the company to continue to benefit from its “strong position in the U.S. and international package and freight markets, yield improvement opportunities and cost management initiatives.” (See FDX stock analysis on TipRanks).

Ahead of 1Q results, Credit Suisse analyst Allison Landry, on Sept. 14, lifted the stock’s price target to $260 (9.9% upside potential) from $171. Landry reiterated a Buy rating, as she expects volume growth to sustain for the longer-term, with “solid” domestic volume CAGR of about 8% over the next 3-4 years. The analyst sees improving margins, strong double-digit EPS growth, and improved free cash flow conversion for FedEx.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 16 Buys and 7 Holds. With shares up 56.5% year-to-date, the average price target of $218.23 implies downside potential of about 7.8% to current levels.