How FedEx is Making the Best Out of COVID-19 and Outperforming Analysts’ Expectations
At a time when the global economy has been hit hard by COVID-19, with many businesses struggling to stay afloat, FedEx Corporation (NYSE: FDX) has been thriving. The courier delivery services giant recently reported third-quarter earnings that were markedly above analysts’ expectations, despite the ongoing demand weakness caused by the pandemic.
Cost-Cutting Measures Paying Off
One of the biggest factors behind FedEx’s outperformance in Q3 was its ongoing efforts to reduce costs. In its earnings report, the company revealed that its cost-cutting measures had partly blunted the impact of weaker demand and inflation on operating income. This is a testament to FedEx’s proactive approach to adapting to the economic realities of the pandemic.
Demand Weakness and its Effect on FedEx Express
Despite the company’s third-quarter successes, it is worth noting that demand weakness has still had a significant impact on its bottom line. The company stated that “third quarter results were negatively affected by continued demand weakness, particularly at FedEx Express.” However, cost-cutting measures have helped to keep things afloat and drive an improved outlook for the current fiscal year.
An Improved Outlook for the Future
Looking forward, FedEx seems to be in a strong position. In fiscal 2023, the company upgraded its guidance on adjusted earnings per share (EPS) to a range of $13.80 to $14.40. This is an increase from $12.50 to $13.50 previously. Furthermore, analysts have been upgrading their ratings and price targets for FedEx, citing the company’s resilience in the face of adversity.
Stifel analysts, for instance, have raised their rating to Buy from Hold and increased the price target to $222 per share from the prior $171. They wrote in a note: “Emerging consensus around an inventory bottom and pull forward with early signs of execution on two significant tranches of cost savings initiatives ($3.7bn and $4bn, respectively) present a compelling investment opportunity at the current, deeply-discounted valuation, in our view.”
Citi analysts have also raised the price target by $25 to $275 per share, noting that “beyond the beat and F4Q raise, we think the potential earnings upside in F24 is quite large, as FedEx posted solidly better… With upcoming catalysts coming from DRIVE day on April 5th and a relatively low F4Q hurdle, we would expect strong upside follow through from FedEx shares.”
All in all, FedEx’s successful Q3 earnings report is a testament to the company’s ability to adapt and thrive even in uncertain times. Despite the ongoing demand weakness, FedEx has managed to make the best out of COVID-19 and outperform analysts’ expectations. With cost-cutting measures paying off and an improved outlook for the future, the company seems poised for continued success.#FedEx #surges #lifting #guidance #analysts #upgrade #deeplydiscounted #valuation #Investing.com