The international shipping company recently reported adjusted fiscal first-quarter earnings per share of $4.37, “missing expectations of more than half a buck higher” Guilfoyle wrote in a recent Real Money Pro Column. While the company generated revenue of $22 billion, beating Wall Street’s estimate by about $140 million, the 14% revenue growth was a deceleration compared to 23% and 30% growth the prior two quarters.
FedEx has several headwinds, including the tightness in hiring employees, rising wages and paying overtime, which cost the company $450 million in expenses for the period. In addition, its operating Income fell from an adjusted $1.64 billion to $1.4 billion on an adjusted operating margin of 6.8%, down from 8.5%. FedEx’s adjusted net income dipped from $1.28 billion to $1.19 billion.
To make matters worse, the company cannot forecast full year fiscal 2022 GAAP EPS or an effective tax rate.
The technical indicators suggest that FedEx is already very oversold.
“Relative Strength, the Full Stochastics Oscillator and the daily MACD all look like something out of a cheap monster movie,” Guilfoyle wrote. “The stock now trades so far below the three key moving averages that I follow as to make mentioning them irrelevant.”
But Guilfoyle said he is “not feeling it. Something is wrong. Wronger than it should be.” He has downgraded FedEx to a "sell" and plans to sell out of his position. “This thing gets back into the high $230s, and I'm outta here,” he wrote.
One factor that would help FedEx boost profit margins is raising prices, which it plans to do starting Jan. 3, 2022. FedEx Express, FedEx Ground, and FedEx Home Delivery shipping rates will rise by an average of 5.9% to 7.9%.