Why FedEx Stock Is Down By 8% Today

FedEx Stock Falls As Quarterly Report Misses Analyst Estimates

FedEx stock found itself under serious pressure after the company released its quarterly report. FedEx reported revenue of $22 billion and GAAP earnings of $4.09 per share, beating analyst estimates on revenue and missing them on earnings.

The company stated that quaterly results were “negatively affected by an estimated $450 million year-over-year increase in costs due to a constrained labor market which impacted labor availability, resulting in network inefficiencies, higher wage rates, and increased purchased transportation expenses”.

FedEx stated that it would increase FedEx Express, FedEx Ground and FedEx Home Delivery rates by an average 5.9% in 2022, while FedEx Freight rates would be increased by an average 5.9% – 7.9%.

For the fiscal 2022, FedEx expects to report earnings of $19.75 – $21.00 per share, compared to the previous estimate of $20.50 – $21.50 per share.

What’s Next For FedEx Stock?

Cost inflation has put significant pressure on FedEx bottom line, and the market is no happy with the company’s results. Currently, analysts expect that FedEx will report earnigns of $21.2 per share in the current year and $23.57 per share in the next year, but these consensus estimates will soon move lower.

While FedEx is trading at roughly 10 forward P/E (based on current analyst estimates) which is certainly cheap for the current market environment, the market does not like higher costs and falling earnings estimates.

FedEx has previously announced its intention to raise shipping rates, so this news had no impact on the stock’s dynamics during today’s trading session.

It remains to be seen whether FedEx stock will attract value-oriented traders ad investors. Current valuation levels look cheap for today’s market environment while the stock has moved from the $320 level in May to the $230 level. In case the market focuses on the company’s longer-term potential in a world where online sales continue to rise at a healthy pace and may further boost earnings of logistics companies, FedEx will have a chance to gain upside momentum.

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