Global transportation and shipping company FedEx (NYSE: FDX) has decided to increase its shipping rates by 6.9% on an average basis for a majority of its services, in lieu of rising costs and inflation. FedEx’s rate increases are indicative of the company’s steps to safeguard compressed margins amidst rising inflation and a slowdown in business volumes.
The increased rates were announced concurrently with the company’s worse-than-expected Fiscal Q1 results. The rate hike does not come as a big surprise amid 40-year high inflation levels and a reduced profit and revenue outlook announced by the company.
The company is also facing a slump in demand with excess capacity. In the most recent quarter, the average number of packages FedEx handled daily declined 11% year-over-year, falling for the third consecutive quarter.
On top of the pricing increase, the company is also planning to achieve savings in the range of $2.2 billion and $2.7 billion.
Is FedEx a Buy, Sell or Hold?
As per TipRanks, analysts are cautiously optimistic about the stock and have a Moderate Buy consensus rating, which is based on 11 Buys and 10 Holds. FedEx’ average price forecast of $235.10 implies 52.13% upside potential.
FedEx stock saw several downward revisions in price targets as well as rating downgrades following the disappointing preliminary Q1 results announcement made last week.
On the contrary, however, investors’ and hedge funds’ community sentiment remains positive on FedEx. FDX stock has a positive signal from hedge fund managers, who added 744,900 shares last quarter.
Further, in the last seven days, a whopping 3.2% of investors holding the stock have increased their positions as per the TipRanks’ Stock Investors tool.
Conclusion
Rate increases by FedEx, coupled with declining volumes due to reduced demand, are not encouraging for the company in the near term.
However, investors believe in the long-term growth potential of the stock and are buying the stock, making the most of the recent dip in the stock price movement.
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