Delivery and logistics company FedEx Corporation (NYSE: FDX) offers a broad portfolio of transportation, e-commerce, and business services on a global basis. Noticeably, the company is innovating digitally under the FedEx brand.
Recently, FedEx posted disappointing results in the fourth quarter of Fiscal 2022 (ended May 31), missing both earnings and revenue expectations, which was indicated by TipRanks’ Website Visits tool.
Despite the miss, shares of the company rose 2.57% in Thursday’s extended trading session following the company’s upbeat outlook.
Results in Detail
FedEx reported adjusted earnings of $6.87 per share in the quarter, missing the consensus estimate by a penny. The company recorded adjusted earnings of $5.01 per share in the prior-year quarter.
Revenue came in at $24.4 billion, up 8% year-over-year but missed analysts’ expectations of $24.5 billion. Growth was aided by elevated shipping rates and fuel surcharges despite the lower volume of packages shipped.
Adjusted operating income was $2.23 billion in the quarter, up 13.2% from the prior-year quarter. The results were aided by lower variable compensation costs and a net fuel gain in each transportation segment.
Meanwhile, reduced shipment demand due to slow growth in the economy and supply chain challenges negatively impacted results. Also, elevated transportation expenses and wage rates acted as headwinds.
Operating income increased 6.7% year-over-year to $1.9 billion, driven by 67% and 20% growth in operating income at the Freight and Express units, respectively.
However, elevated insurance, wages, and transportation costs at FedEx Ground impacted the unit’s operating income, which fell 23%.
For Fiscal 2022, FedEx reported adjusted earnings of $20.61 per share, compared with $18.17 in Fiscal 2021. Revenue of $93.5 billion rose 11.3% year-over-year. Capital expenditures stood at $6.8 billion for the year.
Capital Deployment
During Fiscal 2022, FedEx repurchased common stock worth $2.2 billion. As of May 31, 2022, about $4.1 billion was still available under the current share repurchase authorization. Interestingly, the repurchase of FedEx common stock worth $1.5 billion is expected during the first half of Fiscal 2023.
CEO’s Comments
FedEx CEO Raj Subramaniam commented, “Our foundational investments have set the stage for a strong fiscal 2023. As we move forward, our focus will be on revenue quality and lowering our cost to serve. I am honored to lead our dedicated global team who enable FedEx to lead the industry from a position of strength.”
Guidance
Encouragingly, FedEx’s CFO Michael C. Lenz said, “Our continued emphasis on revenue quality drove significant improvement in our fourth-quarter results. We expect further momentum in fiscal 2023 and beyond as we execute on our initiatives to drive increased profitability and returns.”
For Fiscal 2023, adjusted EPS is predicted in the range of $22.50 to $24.50, above the consensus estimate of $22.21 per share. Capital expenditures are expected to be $6.8 billion.
Particularly, Lenz commented, “As we began fiscal 2023, we are seeing the lower customer demand translate experience in the fourth quarter continue into June and expect first-quarter volumes will continue to be pressured. In addition, Express continues to experience flight constraints due to crew COVID protocols, as has been highlighted industry wide.”
“We do expect both Express air network efficiency and year-over-year volume comparisons across all of our transportation segments to strengthen as we go through the fiscal year,” Lenz added.
Wall Street’s Take
Consensus among analysts is a Strong Buy based on 11 Buys and two Hold. The average FedEx price target of $288.42 implies 26.43% upside potential from current levels. However, shares have lost 24% over the past year.
Website Traffic
The earnings results were evident on TipRanks’ new tool that measures visits to FedEx’s website. Pre-earnings, we were able to see insights into FedEx’s performance in the fiscal fourth quarter.
A website traffic downtrend was visible according to the tool. In Fiscal Q4 2022, total visits to fedex.com showed a decreasing trend on a global basis, representing a 19.13% drop from the third quarter and an 8.19% decrease on a year-over-year basis. This, in turn, indicated that the company might be disappointed with its results in the fourth quarter.
The predictions that were based on TipRanks’ website visits data turned out to be correct, with FedEx reporting lower-than-expected results in Fiscal Q4 2022.
Concluding Remarks
Despite the macro uncertainty and cost pressure at some units, FedEx is optimistic about the upcoming period of continued revenue quality enhancement. The company also provided an upbeat outlook for the future. As a result, based on analysts’ bullish stance and insiders’ positive confidence signal according to the TipRanks Insiders page, investors might add the stock to their portfolio.
Also, vigilance on website trends indicated by TipRanks’ Website Traffic Tool could guide investors in taking a prudent investment decision.
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