FedEx is Soaring After Reporting Strong First Quarter Earnings Results

Emmanuella Nwokenkwo & Kevin Perkins

On Tuesday after the closing bell, FedEx reported earnings results with its fiscal year 2021 Q1 earnings release. On the top line, revenues of $19.3 billion exceeded expectations of $17.55 billion. On the bottom line, adjusted earnings per share of $4.87 exceeded expectations of $2.69 per share.

On the release, CEO Frederick W. Smith stated: “Our earnings growth underscores the importance of our business initiatives and investments over the last several years, and, in many ways, the world has accelerated to meet our strategies. I would like to thank our team members whose efforts during this time have helped keep the world’s health care, industrial and at-home supply chains moving despite the challenges of the global pandemic.”

Following the release, several analysts reported mixed reactions on FedEx’s strong first-quarter results.

Deutsche Bank reiterated its Hold rating and $150 price target. Analysts are questioning the performance of the company and don't expect 2Q growth to be as strong as it was.

“NET/NET not surprisingly we’d expect a positive reaction to these results. We also see positive read-throughs to UPS, though we note that the company has been notably more cautious on extrapolating very strong 2Q growth into 2H’20; this could be just plain conservatism, or a reflection of more difficult comps as UPS laps the big Amazon contract win last year,” stated the analyst.

Morgan Stanley analysts were also skeptical because they're not sure how sustainable the business is due to the conditions resulting from the COVID pandemic.

The analyst stated: “We still believe that eCommerce is an extremely challenging business with low returns – our surveys have shown customer unwillingness to pay for shipping even at the height of quarantine restrictions and we estimate FDX’s F1Q21 Express’ US Domestic Package yield was down ~4% y/y (exFS) despite surcharges (Ground ex FS was +3% y/y – a good outcome vs.FY20 but well below the run rate growth level FY15-19).”

On the other hand, J.P. Morgan believes that Fedex will continue the trend of positive earnings after the company delivered impressive numbers across all of its segments for fiscal 2021 1Q. This led analysts to reiterate their Outperform rating and raise their price target from $265 to $298. “The results easily surpassed buy-side expectations, which had run up into the print, and unlike F4Q20 we believe there is little room to debate that FedEx earnings power has been

underestimated by the market even without contributions from TNT and a potential COVID-19 vaccine.”

Overall, FedEx reported outstanding earnings and handled the circumstances of COVID better than expected. With the pandemic still top of mind, some analysts remain hesitant on the future growth of the business but FedEx plans to continue their momentum going forward.

Tell us your thoughts on the quarter in the comment section below!

Disclosure: At the time of publication, We have no positions in any of the securities mentioned in this article. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.

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Comments (4)
No. 1-4
AlexM5
AlexM5

Amazon will buy Fedex unless Fedex puts themselves in position to be an Amazon competitor

AlexM5
AlexM5

If Fedex expanded by opening up an online store or such thing, they will do great numbers! They already have their customers.

KareemWinters
KareemWinters

Do you guys think Amazon will buy fedex?

Nikhil Gunderia
Nikhil Gunderia

I agree with the Morgan Stanley analysts in that I am unsure how FedEx's current growth will be sustained after the pandemic is over