While COVID-19 has caused massive damage to many companies’ revenue streams, it has also provided others with significant tailwinds. The effects were felt across the board in FedEx’ (FDX) latest quarterly statement.
The shipping giant blew past the estimates in its F1Q21 report. Revenue increased by 13.5% year-over-year to $19.3 billion, beating the Street’s estimates by $1.74 billion. The bottom line expanded too, with Non-GAAP EPS of $4.87 blowing past the forecasts by $2.15. Additionally, the company reported Adj. operating margin of 8.5%, way ahead of the consensus calls for 5.4%.
The handsome beats reflect the times, as the acceleration in e-commerce has trickled down to delivery services. The good news for FedEx is that there are no signs demand will slow down any time soon.
In fact, Credit Suisse analyst Alison Landry believes “demand is rising at a furious pace.” Moreover, Landry points out “for the first time, the balance of power with respect to pricing now rests with the carriers.”
“COVID has pulled forward years of B2C growth, and demand continues to trend at peak levels,” Landry added. “Capacity is tight, just as we head into what is expected to be yet another record peak season; and to the extent that the B2B market starts to recover, this will only exert further pressure. Longer term, volume growth appears sustainable; in fact, FDX now sees the U.S. parcel market doubling to 100m packages/day by 2023 (vs previous 2026).”
What this means for FedEx, according to Landry’s calculations, is that the package carrier will experience “domestic volume CAGR of ~8% over the next 3-4 years.”
As a result, the 5-star analyst reiterated an Outperform (i.e. Buy) rating on FDX, while raising the price target from $260 to $322. This figure implies possible upside of 29% from current levels. (To watch Landry’s track record, click here)
All in all, FedEx share have enjoyed a stellar year, with the stock up by 67%. FDX’s Moderate Buy consensus ratings is based on 16 Buy ratings and 7 Holds. Meanwhile, the $267.05 average price target indicates shares will rise nearly 7% from current levels. (See FDX stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
