Post-Pandemic Unwind? 4 FedEx Analysts Talk Pre-Earnings Miss

Zinger Key Points
  • Shares of FedEx gap down 24% after the company changes the figures on its previous guidance.
  • The global economy is struggling, especially in Asia and Europe, which impacts FedEx's express delivery operations.
Post-Pandemic Unwind? 4 FedEx Analysts Talk Pre-Earnings Miss

FedEx Corporation’s FDX stock dropped on Friday morning following its pre-earnings report on the status of the world economy, which some experts are referring to as a post-COVID-19 pandemic unwind.

Markets in Turmoil? On Friday, the Dow lost 1%, Nasdaq fell 1.59% and the S&P 500 slumped 1.24%. 

After FedEx retracted its full-year forecast on Thursday afternoon and warned a sluggish economy would cause it to fall $500 million shy of its revenue objective, the company's shares gapped down 24%.

The global economy is struggling, especially in Asia and Europe, which impacted FedEx's express delivery operations. The business said the demand for parcels significantly decreased in the last few weeks of the quarter. 

The Numbers: FedEx is expecting revenue of $23.5 billion to $24.0 billion, earnings per diluted share of $2.65 or greater, and earnings per diluted share excluding costs related to business optimization initiatives and business realignment activities of $2.75 or greater.

Read More: Analyst Hikes CPI Inflation Forecast, Expects Fed To Raise Interest Rates Another 1.75% By February

Anticipated capital spending for the fiscal year 2023 has been revised to $6.3 billion, compared to the prior forecast of $6.8 billion.

The company reaffirmed its previously announced plan to repurchase $1.5 billion of FedEx common stock in fiscal 2023.

What the Analysts Think: Morgan Stanley gave FedEx an Equal-Weight rating and a price target of $250.

“We had expected a miss but not of this magnitude,” analyst Ravi Shanker noted.

“Pending further details next week, we believe this is the start of the post-pandemic unwind. We have long warned that the Parcels are over-earning on pandemic-driven volume and pricing tailwinds which are highly likely to mean revert starting in mid-2022 (once the world is back to a post-pandemic normal).”

Raymond James maintained a Market Perform rating. 

Analyst Patrick Tyler Brown wrote that FedEx's EPS expectations were reduced by about 40%, adding, “While we appreciate the valuation at FDX, we remain concerned over further potential EPS cuts and simply see few avenues for a positive re-rating or earnings drift in the near term. Simply, we surmise shares will remain decidedly in the 'penalty box' until news flow improves."

KeyBanc Capital Markets issued a downgrade from Overweight to Sector Weight.

Analyst Todd C. Fowler stated KeyBanc sensed that the expectations ahead of Thursday's preannouncement were largely muted.

"However, we believe the timing and magnitude of the miss and F2Q23 guide-down on the heels of an upbeat FY23 outlook and FY25 targets provided late-June will likely meaningfully shake credibility, creating a higher hurdle for confidence around sustained company-specific execution,” Fowler wrote.

Bank of America Securities issued a downgrade from Buy to Neutral and cut its price target to $186 from $275.

“We remain skeptical of FDX’s long-term goals of $1 billion in Ground savings, $1 billion in overhead reduction, $400-$600 million in European network profitability, given lack of details, allowing little to measure progress,” wrote analyst Ken Hoexter.

FDX Price Action: Shares of FedEx are down 22.48% at $158.90 Friday at publication. The company's 52-week low is $155 and high is $266.79. 

Photo: Shutterstock

 

Posted In: Bank of America SecuritiesKen HoexterKeyBanc Capital MarketsMorgan StanleyPatrick Tyler BrownRavi ShankerRaymond JamesTodd C. FowlerAnalyst ColorEarningsMid CapNewsShort IdeasDowngradesPrice TargetMarketsAnalyst RatingsTrading IdeasGeneral