FedEx FDX, which is set to release its Q2 FY21 financial results on Thursday, December 17, has soared 125% in the past six months to crush its industry’s 40% climb and the S&P 500’s 20%. Wall Street has loved the shipping giant’s deeper push into e-commerce that’s paid off during the coronavirus and is poised to play an even larger role at FDX for years to come.
Digital Commerce Era
FedEx cut ties with Amazon AMZN in the summer of 2019. Since then, it has focused on doing business with AMZN’s rivals and fellow retail giants like Target TGT and Walmart WMT. The company aims to continue to expand its digital commerce and business-to-consumer segments, while also remaining focused on its core business-to-business unit.
The Memphis, Tennessee-based firm is bolstering its automation efforts and modernizing its Express air fleet. Most recently, FDX announced on December 2 that it’s set to buy ShopRunner, which is an e-commerce platform that aims to directly connect brands and merchants with online shoppers.
FedEx’s ground segment soared during the summer months, as consumers went on big digital shopping sprees. The company blew by our bottom-line estimates by 88% and 78%, respectively in the last two quarters. FDX’s revenue jumped over 13% to $19.3 billion last quarter, which marked its strongest sales growth since Q4 FY17.
FedEx executives made a bold cut to their timeline of overall industry expansion. FDX said last quarter that they project the overall U.S. market will reach 100 million packages per day by calendar year 2023, down from its pre-Covid projection of 2026. FDX expects that 96% of this anticipated growth will come from e-commerce.
On top of that, FDX planned to hire even more seasonal holiday workers than normal and rolled out extra fees, mostly aimed at large customers, to offset costs and manage volume during the high-traffic season. And FDX is ready to compete against its core competitors United Parcel Service UPS, DHL, the US Postal Service, and Amazon now and for years to come.
Investors should also note know that the e-commerce market has miles of runway left, as it accounted for roughly 14% of total retail sales in the third quarter, down from a record 16% in Q2. This is up from 11% in the year-ago period, but some might have expected the figure to be higher considering the near-perfect conditions to outperform.
What’s Next?
Shares of FDX experienced some rough times between 2018 and the end of the coronavirus downturn in March. The fall came as its earnings revisions trended heavily in the wrong direction. But as we mentioned at the top, the stock has soared during the market’s comeback, up 160% to outpace Apple AAPL, Amazon, and others. FDX is up 25% in the last three months to double the S&P 500’s run. And it sits about 5% off its recent highs at around $290 a share.
Zacks estimates call for FedEx’s adjusted Q2 EPS to surge 54% to $3.86 a share on 11% higher sales to hit $19.24 billion. Overall, the firm’s full-year fiscal 2021 earnings are projected to climb 64% on 10.5% stronger revenue, with more growth expected in FY22.
FDX also sports a “B” grade for Value and “As” for Growth and Momentum in our Style Scores system. Plus, its Transportation-Air Freight and Cargo space rests in the top 15% of over 250 Zacks industries. And FDX’s dividend yield roughly matches the 10-year U.S. Treasury.
FedEx is a Zacks Rank #3 (Hold) at the moment that’s seen its EPS estimates climb heading into its upcoming earnings release. It could be hard for FDX to continue to impress Wall Street in the near-term. But it does appear to be worth considering as a coronavirus-economy play and beyond.
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Buy FedEx Stock for Continued E-Commerce Growth in 2021? - Yahoo Finance
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