FedEx Q3 Earnings Disappoint; Shares Dip

Shares of FedEx Corporation (NYSE: FDX) dropped 3.8% in Thursday’s extended trading session after the American multinational delivery services company posted lower-than-expected earnings in the third quarter of Fiscal 2022 (ended February 28). Meanwhile, revenue surpassed analysts’ expectations. 

Results in Detail 

FedEx reported Q3 adjusted earnings of $4.59 per share, missing the Street’s estimate of $4.64 per share. The company recorded adjusted earnings of $3.47 per share in the same quarter last year. 

Revenue jumped 9.8% year-over-year to $23.6 billion and surpassed analysts’ expectations of $23.44 billion. 

Adjusted operating income stood at $1.46 billion in the quarter, up 37.7% from the prior-year quarter. Higher revenue per shipment and a net fuel gain at all transportation segments, along with reduced variable compensation costs and less severe winter weather, contributed to the results.  

Meanwhile, the negative impact from the Omicron variant, along with elevated transportation costs and wage rates had a significant effect on the results. Notably, Omicron contributed to volume softness of about $350 million during the quarter. 

At FedEx Ground, operating costs remained high due to the competitive labor environment, which resulted in higher labor rates. This, in turn, increased total costs by about $210 million in the third quarter. 

Meanwhile, FedEx Freight’s third-quarter operating income nearly tripled on a year-over-year basis. 

COO Comments 

FedEx’s COO Raj Subramaniam commented, “Our strategic investments are fundamentally changing the way we perform and execute in e-commerce, demonstrated by our strong performance during the peak month of December. We are committed to delivering for our customers, and remain focused on our strategic initiatives to increase productivity, lower our cost to serve and create shareholder value.” 

Guidance 

For Fiscal 2022, the company expects adjusted EPS in the range of $20.50 to $21.50, versus the consensus estimate of $20.61 per share. Additionally, capital expenditures are likely to be $7 billion, lower than the prior forecast of $7.2 billion. 

Wall Street’s Take 

Consensus among analysts is a Strong Buy based on eight Buys and one Hold. The average FedEx price target of $310.56 implies 36.22% upside potential from current levels. However, shares have lost 12.5% over the past year. 

Website Traffic 

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR) offers insight into FedEx’s performance in the third quarter.  

According to the tool, website traffic declined in the third quarter. In Q3 2022, total estimated visits on fedex.com showed a decreasing trend globally, declining 1.04% from the second quarter.

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