FedEx’s earnings report beat analyst estimates

Investors in FedEx Corporation had a good week, as its shares rose 9.5% to close at US$220 following the release of its quarterly results. Revenues disappointed slightly, as sales of US$22b were 2.5% below what the analysts had predicted. Profits were a relative bright spot, with statutory per-share earnings of US$3.05 coming in 13% above what was anticipated. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for FedEx
Following last week’s earnings report, FedEx’s 24 analysts are forecasting 2024 revenues to be US$92.1b, approximately in line with the last 12 months. Per-share earnings are expected to shoot up 47% to US$17.42. Before this earnings report, the analysts had been forecasting revenues of US$92.9b and earnings per share (EPS) of US$16.79 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target rose 15% to US$236, suggesting that higher earnings estimates flow through to the stock’s valuation as well. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values FedEx at US$305 per share, while the most bearish prices it at US$145. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the FedEx’s past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 0.4% by the end of 2024. This indicates a significant reduction from annual growth of 8.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – FedEx is expected to lag the wider industry.

The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around FedEx’s earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that FedEx’s revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. More at simplywall.st