FedEx Posts Better-than-Expected Q2 Results; Shares Gain

Shares of FedEx Corporation (NYSE: FDX) jumped almost 5% in Thursday’s extended trading session as the American multinational delivery services company’s fiscal second-quarter 2022 results (ended November 30) surpassed analysts’ expectations. Despite labor issues, strong top-line growth and effective cost management drove the results.

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Results in Detail

FedEx stock reported Q2 adjusted earnings of $4.83 per share, easily beating the Street’s estimate of $4.27 per share. Results were in line with adjusted earnings per share reported in the same quarter last year.

Revenue increased 14% year-over-year to $23.5 billion and came in well ahead of analysts’ expectations of $22.44 billion.

Adjusted operating income came in at $1.68 billion in the quarter, up 11.3% from the prior-year quarter. Higher revenue per shipment at all transportation segments, despite labor challenges, aided the results.

Notably, FedEx experienced network inefficiencies, elevated transportation costs, and higher wage rates, as the challenging labor market impacted the availability and cost of labor. This, in turn, increased the company’s costs by an estimated $470 million year-over-year, primarily at FedEx Ground.

COO Comments

FedEx’s COO Raj Subramaniam commented, “Strategic investments that we have made to our networks and systems have enabled us to provide critical delivery capacity and supply chain expertise to support the needs of our customers, while also making it possible for us to capitalize on the growing e-commerce parcel market.”

Guidance

For Fiscal 2021, the company expects adjusted EPS in the range of $20.50 to $21.50, versus the consensus estimate of $19.64 per share.

Capital Deployment

FedEx’s Board of Directors has authorized a new $5 billion share repurchase program, in addition to the existing program to repurchase up to 25 million shares. Notably, the existing program, authorized in 2016, has 2.3 million shares outstanding.

Markedly, the company has repurchased common stock worth around $750 million year-to-date and ended the reported quarter with $6.8 billion in cash.

On November 19, 2021, the company declared a common stock dividend of $0.75 per share, to be paid on December 27 to shareholders of record as of December 13, 2021. The annual dividend of $3.00 now reflects a dividend yield of 1.26%.

Wall Street’s Take

Consensus among analysts is a Strong Buy based on17 Buys versus 4 Holds. The average FedEx price target of $305.60 implies 28.1% upside potential from current levels. However, shares have lost 18.4% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into FedEx’s performance this quarter. According to the tool, the FedEx website recorded a 1.44% increase in global visits in November compared to the same period last year. Also, year-to-date website traffic growth stands at 18.79%.