Why FedEx Stock Is Down By 5% Today

Key Insights

• FedEx earnings miss analyst estimates.
• The company faces pressure from rising transportation and wage costs.
• The stock will need additional positive catalysts to break the current downside trend.

FedEx Stock Falls After Earnings Report Misses Analyst Estimates

Shares of FedEx gained downside momentum after the company released its fiscal third-quarter report. FedEx reported revenue of $23.6 billion and adjusted earnings of $4.59 per share, beating analyst estimates on revenue and missing them on earnings.

Higher transportation and wage costs have put some pressure on the company’s profits. At the same time, FedEx noted that “the quarter’s results also benefited from lower variable compensation expense and less severe winter weather, resulting in favorable year-over-year comparisons”.

For the full fiscal year, FedEx expects to report earnings of $20.50 – $21.50 per share. The company’s capital spending guidance was lowered from $7.2 billion to $7.0 billion.

What’s Next For FedEx Stock?

The market is focused on the increasing cost pressures and their potential impact on the company’s earnings in the upcoming quarters. Currently, analysts expect that FedEx will report earnings of $20.62 per share in the current fiscal year, so the company’s guidance is above the analyst consensus. In the next fiscal year, FedEx earnings are expected to increase to $22.74 per share.

It should be noted that analyst estimates have been moving lower in recent weeks, and it remains to be seen whether the company’s new guidance will change this trend.

Transportation costs are set to increase due to the recent developments in commodity markets, and it looks that a $100 oil may become the “new normal” for the upcoming months. In this environment, FedEx profits may find themselves under pressure, which will be bearish for the company’s stock.

At current levels, FedEx stock is trading at less than 10 forward P/E, which looks cheap. However, the stock will need positive catalysts that could offset concerns about rising costs.

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