FedEx Delivers An Unattractive Rating Heading Into Holiday Season

FedEx Corp has been a household name for years – but it was the pandemic that turned this shipping staple into an essential entity in our everyday lives.

The Memphis logistics giant dropped its latest financial report for the first quarter of its 2021 fiscal year this past Tuesday, leading to a sudden increase in stock prices on top of an already-stellar year. The company attributes its most recent growth to the volume increase in both U.S. residential deliveries and international priority shipping in the wake of massive shutdowns and quarantines.

For instance, residential shipping volume alone jumped from 8.8 million to 11 million daily deliveries in the last quarter. Unfortunately, these gains were partially offset by a decrease in commercial traffic as stores shuttered their doors.

This higher demand has also led to higher costs for the company in areas such as employee compensation and safety precaution spending. And yet, that hasn’t stopped FedEx from ramping up its operations in preparation for an extended holiday season – the company plans to add over 70,000 new positions globally to cover peak delivery season demands.

This expensive move is partially a response to retailers stocking their shelves early in an attempt to avoid late-season delays. However, some of this demand comes from what FedEx predicts will become a reliable customer base in light of the “new normal” of working and shopping from home.

Despite the potential for massive revenue and stock increases, the company refused to release guidance for the fiscal year of 2021, citing the uncertainties of the ongoing pandemic. While this would usually be cause for concern, this, too, is a new normal in light of pandemic-centered operations.

However, this can also lead investors to be uncertain in whether a company’s stock is worth the price in such unprecedented times. 

While we can’t write a company’s guidance for you, we can give you an idea of where the company is headed (or more specifically, the company’s stock). Qai’s deep learning algorithms have scoured the numbers to provide the most informed recommendation on the market – and the results are in.

Without further ado, let’s dive in.

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Fedex Corporation (FDX)

FedEx Corporation ticked up 0.14% on Wednesday, ending the day at $236.67 per share on volume of nearly 8 million shares. This price comes as a continuation of monthlong increases for the company, as evidenced in the 10- and 22-day price averages of $227.62 and $219.34, respectively. Overall, FedEx stock is trading up a whopping 54.6% for the year.

The company’s other metrics, however, are a bit of a mixed bad.

On the one hand, the company has reported decent revenue increases over the last three years, bringing the company’s revenue from $65.4 billion to over $69.2 billion.

On the other hand, we have all of FedEx’s other data.

For instance, while the company’s operating income has seen respectable 24% growth in the last fiscal year, the last three have seen a dramatic decrease in operational income – falling from $5.5 billion to a measly $2.7 billion.

In addition, while FedEx’s EPS grew over 38% in the last year to $4.90 per share, that’s nothing on the $16.79 the company reported three years ago.

Furthermore, ROE has taken a drastic tumble in the same time frame, dropping from 25.8% to a mere 7.13%.

This concerning mix of data has led to FedEx trading on a forward 12-month P/E of 16.64. Although the company is optimistic about its future, there’s little wiggle room for growth following the pandemic rush – current revenue predictions peg FedEx at a paltry 0.18% growth over the next year.

So, What’s the Verdict?

FedEx has had a surprisingly good year in terms of increased revenue and residential deliveries – but the company’s unexpected growth comes at an unexpected cost.

The resulting financial data has resulted in a below-average report card from our AI, as the company earned a C in both Technical and Momentum Volatility and D in Growth and Quality Value.

Unfortunately for FedEx, this makes their stock an Unattractive proposition for the month of September.

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