Alejandro ArriecheThe combination of a fading pandemic tailwind and disappointing results during the first quarter of the 2022 fiscal year contributed to FedEx’s stock value dropping to its lowest level since September 2020.
With vaccines now being rolled out across the world and experimental treatments starting to show positive results in reducing the virus’s severity, the growing demand for courier services that may have been sparked by people staying home could decelerate if the market returns to pre-pandemic levels. If that were to occur, it could negatively affect FedEx’s results, which were boosted during lockdowns.
With all this in mind, the following FedEx share price forecast will take a look at what has been driving the price of the stock lately to outline plausible scenarios for the future as we enter the last quarter of 2021.
FedEx stock news
On 27 July, FedEx’s stock experienced a sharp 5% decline after one of its top rivals – United Parcel Services (UPS) – predicted slower than expected revenue growth for the upcoming second half of the year.
The tailwind that produced the kind of growth seen during the peak of the pandemic may have started to fade. Brian Newman, the chief executive of UPS, said during the earnings call:
“On a consolidated basis, we expect second-half 2021 revenue growth of around 5.4% year over year, which takes into account the divestiture of UPS Freight, tough comparisons from last year and our revenue quality initiatives.”
Comparatively, revenues for the first half of the year grew by 20.4% compared to the same period a year ago. Therefore, this 5.4% jump forecasted for the second semester indicates a deceleration in the company’s growth rates. Although partially affected by the sale of UPS Freight it could also be the result of a fading tailwind produced by the pandemic.
Investors seemed to view these results from FedEx’s top rival as indicative of how the rest of the companies within the sector would perform, which could explain why FedEx’s share price reacted so negatively to the news.
Months later, on 22 September, FedEx reported its financial results covering the first quarter of its 2022 fiscal year. Among the most relevant announcements, the management trimmed its earnings projections for the entire financial year amid higher labour costs and operating inefficiencies.
Additionally, the company missed analysts' estimates for both revenues and earnings for the period as top-line results landed at $22bn – slightly lower than the $21.9bn consensus forecast – while adjusted earnings per share came in at $4.37 or 55 cents below the consensus estimate according to data from Refinitiv.
FedEx stock analysis: technical view
The negative catalysts, including higher labour costs and operating inefficiencies, set things in motion for FedEx to enter a sharp downturn that has plunged the share price to its lowest level since September 2020 as indicated in the FedEx stock chart shown above.
The breaking of the $235 support remains one of the most concerning price action events that have taken place recently although the stock has temporarily bounced off the $216 area following some broad-market strength.
Trading volumes have been particularly high in the past weeks in the midst of the downturn which indicates that sentiment could have shifted for the company during these temporary headwinds.
Moreover, the relative strength index (RSI) has drifted to its lowest level in nearly three years although it has recovered slightly in the past few sessions while the moving average convergence divergence (MACD) has posted its worst reading since the 2020 pandemic crash.
These two momentum indicators justify the following FedEx stock projections:
Sellers may have gone too far already – which could set the stage for a technical rebound.
Something seems to have shifted from a fundamental standpoint and the fair value assessments of the business may have been affected by these latest developments.
Upon considering these factors, the short-term outlook for FedEx seems to be bullish, potentially with an upcoming technical rebound. Until the extent of the influence of its current headwinds can be fully appraised, however, the long-term outlook seems less positive.
These comments and opinions about FedEx’s technical setup should not be taken as trading advice or as a recommendation to invest in FedEx stock. Investors are encouraged to perform their own assessment before making a decision to buy or sell this or any other financial instrument.
FedEx fundamental analysis
For the full 2022 fiscal year, FedEx has estimated that its earnings per share, upon adjusting for some special items, may land at around $20.50 to $21.50 per share resulting in a 22%–28% improvement compared to the company’s normalised diluted EPS from 2020 of $16.75 per share.
Before last year, normalised earnings for the company were a bit erratic and that reduces the predictability of the firm’s performance moving forward.
hat said, according to data from Koyfin, the firm’s adjusted EPS should grow at an average rate of 11.4% in the next two years (2023 and 2024 fiscal).
Using the stock’s current forward price-to-earnings ratio of 11, this results in a price-to-earnings-to-growth ratio of 1.1. This ratio indicates that FedEx stock is fairly valued based on its projected earnings growth rate for the next two years.
Drafting an FDX stock forecast in this current environment is particularly challenging, however, as multiple external factors, including the aftermath of the pandemic, could affect the company’s performance.
With that in mind, even though this FedEx stock price analysis makes it seem as if the company is trading at an attractive valuation, the uncertainties surrounding the business should not be underestimated since they could have a material negative effect on the performance of the company in the future.
FedEx (FDX) stock forecast: analysts views
Based on the technical and fundamental analysis outlined above, the short-term outlook for FedEx is bullish but its mid-term prospects are highly uncertain due to the current labour market situation and inflationary pressures.
This seemingly conflicting outlook can be seen in the 12-month FedEx stock prediction from the 30 analysts surveyed by Seeking Alpha, which puts the target price at $299.89 per share – 35.8% above the current price of $220.84 per share.
Out of these 30 firms, 21 hold a buy rating on the stock while the remaining 9 are neutral on FedEx. It is important to note that many analysts lowered their price targets for FDX, however, including Barclays (down to $345 from $375), Argus (down to $270 from $330), and Citigroup (down to $300 from $360).
In total, there were 14 downgraded price target revisions from analysts following the release of the firm’s first-quarter 2022 financial results according to data from MarketBeat.
Finally, Wallet Investor’s longer-term algorithm-based prediction for FedEx stock for 2025 sees the price rising to between $267.44 to $275.48 by the end of December resulting in an estimated 4-year CAGR of around 5% based on today’s price.
When looking for FedEx share price predictions, bear in mind that analyst forecasts can be wrong. Analysts’ projections are based on making a fundamental and technical study of the company’s performance. Past performance never guarantees future results, however. Traders should conduct their own research before making any investment. And never invest more than they can afford to lose.
