Pro: ‘eCommerce trade is still favourable for FedEx’ after Q2 earnings

FedEx Corp (NYSE:FDX) tanked nearly 10% in extended hours on Tuesday after reporting weaker-than-expected results for its second financial quarter.

FedEx stock down on trimmed guidance

The stock is being punished also because the package-delivery giant lowered its sales guidance for fiscal 2024 amid fears of subdued demand through the holiday season.

FedEx now forecasts its sales to be down in low-single-digit percentage this year. Its previous outlook was for that metric to remain approximately flat. Still, Delano Saporu of New Street Advisors said on CNBC’s “The Exchange” today:

The eCommerce trade I think is still favourable for FedEx. The play is from April to expand and drive operating margin about 10% and I think that play works out.

On Tuesday, the New York listed firm also confirmed that it’s market share improved as UPS lost business during negotiations with Teamsters. FedEx stock is still up some 45% year-to-date.

Notable figures in FedEx Q2 earnings

• Earned $900 million versus the year-ago $790 million
• Per-share earnings also increased from $3.07 to $3.55
• Adjusted EPS printed at $3.99 as per the press release
• Sales declined about 2.5% year-on-year to $22.2 billion
• Consensus was $4.19 a share on $22.36 billion sales

FedEx saw volumes decline in “Express” business in the recently concluded quarter while they were up in its “Ground” segment. Saporu added:

One thing that can help [a lot of their business segments] is the drop in crude oil. When price to sales gets to one time, that’s the time to trim. Right now, it’s below that.

Is it worth investing in FedEx stock?

Saporu also likes FedEx Corp for its plans of cutting costs by a whopping $6.0 billion by fiscal 2027.

The multinational is buying back stock and has recently raised dividend as well that signals confidence its management has in its plan, he added.

Last week, Baird analyst Garrett Holland also reiterated his “outperform” rating on FedEx stock. He raised his price objective on the transport and logistics services company to $315 which suggests about a 20% upside from here.

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