FDX Stock: Should FedEx Stock Be Part of Your Portfolio In July 2022?

Author: Finscreener

Estimated read time: 3 minutes

Publication date: 4th Jul 2022 11:46 GMT+1

FedEx Corporation (NYSE: FDX) is one of the largest logistics companies in the world. Based out of Tennessee, it works through several segments and is the largest parcel delivery service provider globally.

Its FedEx Express segment is into the transportation of small packages and freight, while the FedEx Ground segment indulges in day-certain delivery services to businesses and residences. Other segments include the FedEx Freight segment, the FedEx Services segment, and the Corporate, Other, and Eliminations segment.

FedEx has been one of the beneficiaries of the pandemic. Last year, capitalizing on the increased delivery services during the pandemic, the stock surpassed $300. But the rally was short-lived as FDX was adversely impacted by supply chain issues, labor problems, and rising fuel costs. 

However, after the release of its latest financials, FedEx stock got a big boost. The company has gained almost 9% in the five days following its quarterly results but is still down 13.5% year to date. 


FedEx believes e-commerce has huge prospects

As per The Business Research Company, the global e-commerce market is expected to increase to $5.44 trillion in 2026 from $3.1 trillion in 2022, growing at a CAGR of 15.2% during the said period. FedEx is a leading player in this growing e-commerce segment and can benefit significantly from the incoming opportunities.

Three years back, FedEx had decided to invest in expanding its e-commerce capacity and doubling its operations. Now, there are opportunities for the company to widen its focus on B2C through its acquisition of ShopRunne. This two-day free shipping program can turn the company’s hundreds of shipping partners into thousands in the coming times. FedEx has also entered into a new multi-year agreement with e-commerce seller Boxed.


FedEx provides stronger than expected guidance

FedEx recently released its fourth-quarter financials for fiscal 2022. It reported an adjusted EPS of $6.87 per share along with quarterly revenue of $24.4 billion, which was 8% higher compared to last year despite higher transportation costs. Adjusted operating income also rose 13.2% year over year to $2.23 billion driven by net fuel benefit across all its segments coupled with lower variable compensation expenses.

Notably, the company had boosted its dividend payments by a whopping 53% to $1.15 per share. Moreover, FedEx expects earnings between $22.45 and $24.45 per share in fiscal 2023 as it aims to spend $6.8 billion to improve efficiency by modernization of fleet and facility and increased automation. 

FedEx is also taking an active part in reducing carbon emissions. The company had added TNT Express into its trucking business already and this move can provide it with meaningful synergies going forward. 

It has taken its first step towards becoming an all-electric, zero-emission delivery fleet by 2040 with the receiving of the 150 electric-delivery vehicles from General Motors (NYSE: GM) owned BrightDrop. FedEx has ordered 2,500 electric trucks for its parcel and delivery services and the full order is expected to be incorporated by the next few years. Also, it has installed more than 500 charging stations throughout California to boost its charging infrastructure.

FedEx stock is currently priced at $221 and the average analyst price target for the stock is $301.38. That’s a potential upside of almost 35%.

With more people moving towards online shopping, the earnings outlook of the company might continue to improve. However, with the looming threat of a recession in the market now, FedEx stock might not be a suitable buy for investors with lower risk appetites.

Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.