FedEx Q2 preview: Where next for FedEx stock?

Josh Warner
By :  ,  Former Market Analyst

When will FedEx release Q2 earnings?

FedEx will release second quarter earnings after the markets close on Thursday December 16.


FedEx Q2 earnings preview: what to expect from the results

FedEx was one of the initial winners from the pandemic as shopping shifted online and caused a boom in its delivery services, but sentiment has waned since the middle of this year as earnings start to come under pressure.

FedEx performed worse-than-expected in the first quarter and was forced to downgrade its guidance for the full year after warning conditions were more challenging than anticipated and that these headwinds are expected to linger for longer. Costs are rising across the board and it has struggled to secure the labour it needs, both of which could be exacerbated further now that the Omicron variant is threatening to plunge countries back into lockdown.

Wall Street forecasts revenue will rise to $22.4 billion in the second quarter from $20.6 billion the year before, while net income is expected to increase to $1.16 billion from $1.22 billion. Adjusted EPS is forecast to drop to $4.28 from $4.83 and reported EPS is seen dropping to $4.11 from $4.55.

Although revenue is rising as FedEx continues to increase prices to battle rising costs, it is failing to convert this into higher earnings. In fact, another rise in prices is coming in early 2022 when it will be increasing shipping rates by around 5.9%, with its Freight division set to see an even larger rise of up to 7.9%. It is also facing tougher comparatives as it comes up against record earnings from last year.

The tough climate prompted FedEx to cut its earnings guidance for the full year, stating EPS would come in between $18.25 to $19.50 (before accounting adjustments due to the MTM retirement plan). It was previously targeting a range of $18.50 to $19.90. The main job FedEx’s board has this week is to keep this guidance intact to install confidence that earnings will not deteriorate further. FedEx has warned its outlook assumes ‘continued growth in US industrial production and global trade, a gradual improvement in labor availability beginning in the second half of fiscal 2022, no additional COVID-19-related business restrictions, and current fuel price expectations.’

That signals that FedEx is expecting things to remain tough for the next six to seven months before starting to improve in the back-end of 2022, and the Omicron variant poses a significant threat to all of those assumptions as we enter the new year.

FedEx shares rallied to all-time highs at the start of June 2021 but have lost over 21% since then and are trading 2.7% lower since the start of the year. It has underperformed its peers, with UPS having risen over 27% this year and currently trading just shy of fresh all-time highs. Meanwhile, the S&P 500 has also jumped over 27% in 2021. Still, brokers remain bullish on FedEx’s prospects and have a Buy rating on the stock with an average target price of $303.1, implying there is over 23% potential upside to the current share price.


Where next for FedEx stock?

The FedEx share price has been trending lower since June. The share price appeared to find a floor at $216 and rebounded higher.  

After initially facing rejection at the falling trendline, the share price fell back to $227 before pushing higher to the trendline resistance once more. The RSI is just in bullish territory suggesting that more gains could be on the cards. 

A move above $247 trendline resistance exposes the 100 sma at $250 and the November high at $255. Beyond here buyers could gain traction. 

Failure to rise above the falling trendline could see the price fall back to support at $237, the 50 sma, ahead of the December low of $227. 

Where next for FedEx stock?


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