FedEx (FDX) shared fiscal first-quarter results yesterday after the market closed, but it was the lowered guidance that really sent ripples through the market. The stock is down 14% so far Friday. Here’s how the company performed in Q1:
- Earnings: $3.60 per share compared to the consensus of $4.75 per share.
- Revenue: $21.6 billion compared to the consensus of $21.87 billion.
The delivery giant’s net income for the first quarter worked out to $790 million, a concerning step backward from this time last year when it reported $1.08 billion.
CEO Raj Subramaniam said that the results for this quarter reflect a weak consumer environment. The less money customers are willing to spend, the fewer orders they place – and in turn, companies like FedEx feel the effects of lower deliveries.
With the holiday shopping season sneaking up on us fast, there’s optimism that the Fed’s decision to cut interest rates will spark more borrowing and spending. However, Subramaniam is not so upbeat about his company’s prospects for finishing the year strong.
He went on to say that even if industrial production improves in the second half of the year, expectations are low based on what we’re witnessing in our economic climate right now.
Now, FedEx is anticipating low-single-digit percentage sales growth for fiscal 2025 compared to the previous guidance of low- to mid-single-digit percentage growth. Its adjusted earnings outlook has also been narrowed from $20 to $22 a share down to just $20 to $21 for the year.
Just last week FedEx announced it would raise prices nearly 6% to start 2025 as the costs of doing business continue to climb. With customers already choosing the delivery service’s cheaper option, it remains to be seen whether this move will help or hinder results.
The loss of a massive USPS contract next week will also take a toll. While some are optimistic that this will give the company the freedom to focus on delivery network development, It’s hard to ignore the $500 million in revenue that is dissipating.
Shares of FDX had been rallying leading into this earnings update, but today’s performance puts the stock down 10% this month. While it’s still in the green in the long-term outlook, investors are starting to get restless.
We’ve taken a closer look at FDX in the VectorVest stock analysis software and found something you need to see if you’re a current investor. It might be time to sell this stock.
FDX Has Excellent Upside Potential and Fair Safety, But Poor Timing is Holding it Back
VectorVest distills complex technical and fundamental data into clear, actionable insights, saving you time and stress while empowering you to win more trades. You’re given everything you need to make calculated, emotionless investment decisions in 3 simple ratings.
These are relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average, allowing for quick and easy interpretation.
But it gets even better, as the system issues a buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. Here’s what we found for FDX:
- Excellent Upside Potential: The RV rating draws a comparison between a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This makes it a far superior indicator to the typical comparison of price to value alone. FDX has an excellent RV rating of 1.42. The stock is undervalued, with a current value of $396.57.
- Fair Safety: The RS rating is a risk indicator. It’s computed from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. FDX has a fair RS rating of 1.01
- Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. This is where the issue lies for FDX - it has a poor RT rating of 0.72 after losing 14% so far today.
The overall VST rating of 1.05 is fair for FDX, but the stock is rated a SELL right now. If you’re a current investor, take a closer look with a free stock analysis at VectorVest today and streamline your trading strategy to win more trades with less work!
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VectorVest advocates buying safe, undervalued stocks, rising in price. FDX has fallen more than 14% so far Friday morning after a weak first quarter performance coupled with a downtrodden outlook for the full year. The stock may have excellent upside potential and fair safety, but poor timing is weighing it down.
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