Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

FedEx Q1 '22 Earnings Preview: Rising Costs, Labor Shortage To Squeeze Margins 

By Investing.com (Haris Anwar/Investing.com)Stock MarketsSep 20, 2021 03:00AM ET
www.investing.com/analysis/fedex-q1-22-earnings-preview-rising-costs-labor-shortage-to-squeeze-margins-200602413
FedEx Q1 '22 Earnings Preview: Rising Costs, Labor Shortage To Squeeze Margins 
By Investing.com (Haris Anwar/Investing.com)   |  Sep 20, 2021 03:00AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
  • Reports Q1 2022 results on Tuesday, Sept. 21, after the close
  • Revenue expectation: $21.9 billion
  • EPS expectation: $4.94

The COVID-fueled party may just be over for FedEx (NYSE:FDX). After an unexpected surge in demand for its delivery services during the pandemic, the freight and logistics giant is now struggling to control costs and hire workers.

These challenges are likely to hurt the bottom-line of the Memphis, Tennessee-based parcel carrier when it reports its fiscal 2022, first quarter earnings tomorrow. Sales will likely decline to $21.9 billion from $22.6 billion in the previous period, according to analysts consensus estimates. The per share adjusted profit will also fall to $4.94 from $5.01.

FDX Weekly TTM
FDX Weekly TTM

These subdued expectations have hurt the shares of the transportation colossus. The stock is down more than 20% since the June high of $319.90. It closed on Friday at $255.22.

Investors turned bullish on FedEx early this year, encouraged by growing demand for the company’s delivery services during the pandemic when shoppers switched to e-commerce during lockdowns and an overall stay-at-home environment.

The company's business restructuring—which had been planned before the pandemic—proved to be a great launching pad for FedEx in this new environment. Before COVID-19 spread across the globe, the company had already moved to a seven-day service model, expanded capacity for larger packages, introduced new routing software, and began pushing more Express packages into its lower-cost Ground network.

Those changes helped FedEx increase profit on a flood of residential packages while its more lucrative business delivery service suffered during the US lockdown. Going forward, the big challenge for the company is to contain its costs in an environment where inflation and worker shortages are hurting many businesses.

Long-Term Appeal Remains Intact

FedEx told investors in June that its capital spending will rise more than 20% during its fiscal 2022. Still, many analysts believe that FedEx is a long-term buy due to the continuing expansion of online shopping. UBS, while cutting its earnings estimate for FedEx, said in a note to clients on Friday that labor market issues are likely hurting the company’s profitability.

According to the note, carried by CNBC.com:

“Visibility to the path forward on margin performance is limited at the present time as it is not clear how much of the 1Q issues will remain as a headwind looking forward.”

UBS cut its price target on FedEx to $380 per share from $397, but kept its buy rating on the stock. UBS added the start-up costs for a new hub in California are temporary, but it was unclear when earnings would recover.

JPMorgan, while maintaining its overweight rating on the stock, said in a recent note that FedEX is a multiyear growth story in the transportation sector, with the company’s Ground division leading the gains. The note added:

“After a string of earnings disappointments, the fundamental momentum in each segment combined with well-timed strategic initiatives creates the most attractive multi-year growth story in transports.”

Of 31 analysts covering the stock for Investing.com, 24 have given it an “Outperform” rating.

FDX Consensus Estimates
FDX Consensus Estimates

Chart: Investing.com

The consensus price estimate among analysts polled is $341.57—a 33% upside potential target from Friday's closing price.

Bottom Line

FedEx is facing temporary cost escalations as the delivery giant expands to cater to growing e-commerce demand. But the macro trends are in favor of the business, making its stock a long-term buy after the current spell of weakness.

Tuesday’s earnings report will likely prove that point.

FedEx Q1 '22 Earnings Preview: Rising Costs, Labor Shortage To Squeeze Margins 
 

Related Articles

Chris Vermeulen
What Is Contago In The VIX? By Chris Vermeulen - Oct 28, 2021 3

I have been trading options and coaching / mentoring other new options traders for years. I have seen new traders who were lucky and ended up with some winning trades and others...

FedEx Q1 '22 Earnings Preview: Rising Costs, Labor Shortage To Squeeze Margins 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Nitesh Chaudhary
Nitesh Chaudhary Sep 20, 2021 3:06PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
may God bless you
Bobby Sky
Bobby Sky Sep 20, 2021 2:32PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Nicolas Duran
Nicolas Duran Sep 20, 2021 2:31PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Pay workers more $
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email