FedEx shares with low volume ahead of Earnings Report.

Transport giant #FedEx is expected to release its fiscal second quarter 2023 results on Tuesday (20/12), after market close. The company previously announced cost-cutting measures including plans to lay off workers and fly planes during the holiday season. The earnings call to be released will be the second call led by Raj Subramaniam since his appointment as CEO in March.

It will be the first since FedEx announced plans in September to cut costs by between $2.2 billion and $2.7 billion this fiscal year following a disappointing first-quarter earnings report. The company’s last quarterly results report was released on Thursday, 22 September. The shipping company posted earnings per share of $3.44 for the quarter, the company’s revenue came in at $23.2 billion. FedEx had a net margin of 3.79% and return on equity of 20.95%. Compared to the same quarter of the previous year, the company’s quarterly revenue increased by 5.4%. The business generated $4.37 in EPS during the same period last year.

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FedEx has announced several cost-cutting measures in recent months including furloughing FedEx Freight employees in November to cover slow demand. Other steps the company has taken recently are closing some FedEx Ground sorting facilities and adjusting the FedEx Express flight network. Of the approximately $2.2 billion to $2.7 billion in cuts this fiscal year, FedEx expects to save $1.5 billion to $1.7 billion at FedEx Express, $350 million to $500 million at FedEx Ground, and $350 million to $500 million in other overhead costs. FedEx cited the global economic downturn as one of the reasons behind its disappointing first quarter results.

The earnings report to be released, will show how FedEx performed during the peak holiday season. FedEx shares slumped in September, after the ground and air delivery service warned of falling demand in the US and Asia and service problems in Europe.

FedEx is expected to post earnings of $2.77 per share, representing a change of -42.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.3% over the last 30 days. The consensus earnings estimate of $14.18 for the current fiscal year shows a year-on-year change of -31.2%. This estimate has changed -1.1% over the last 30 days. For the next fiscal year, the consensus earnings estimate of $17.06 shows a change of +20.3% from what FedEx was expected to report a year ago. Over the past month, the forecast has changed -0.1%.

FedEx shares have slumped more than 33% in 2022, this figure was minimised after gains in October and November. Yet Zacks gives FedEx a #3 (hold) rating.

Technical Analysis

Shares of shipping giant #FedEx fell about 21.4% after the company announced disappointing results for the last quarter, citing weakness in global shipping volumes and the market has downgraded the stock. CEO Raj Subramaniam said he expects the economy to enter a “worldwide recession.” #FedEx was trading at $171.71 as of 15 December. Over the past 52-week period, the stock has fallen approximately 33%. Given that these returns are generally negative, long-term shareholders are likely to be slightly disappointed with this earnings release. Monday’s trading (19/12) saw the value of the stock fall by more than 1% again and is trading near the support of $167.11.

The lowest price recorded was at $141.73 at the 76.8% retracement level (from $88.54 and $319.45 drawdowns).  The visible wave structure is still predominantly bearish, below the 26-week EMA. The downside projection is pinned at FE61.8% (from the 248.62-141.73 pullback and $184.16 at $118.10). Technically, however, investors are likely to consider the $141.73 level given that the wave of decline has entered the 5th elliot wave. While a move above the minor resistance of $184.16 would confirm a short-term bottoming at $141.73 and the share price could test $192.61 and further to $215.76 (200-week EMA). The RSI is at 40.78 and is likely to enter the oversold level for the umpteenth time, while the MACD is still in the selling zone with signal clipping on the histogram which tends to indicate the failure of the rally in the correction wave.

JPMorgan Chase & Co. cut their target price on FedEx from $192.00 to $184.00 in a research note on Thursday, 8 December. Evercore ISI lowered their target price on shares of FedEx from $243.00 to $225.00 in a research note on Friday, 23 September. Jefferies Financial Group set a “hold” rating and a $170.00 price target. Berenberg Bank set a $190.00 price objective on FedEx in a research report on Monday, 26 September. BMO Capital Markets lowered their target price on FedEx from $215.00 to $190.00 in a report on Friday, 23 September. Twelve analysts have rated the stock with a hold rating and eleven have given a buy rating to the company’s stock. According to MarketBeat.com, the stock currently has a consensus rating of “Hold” and a consensus price target of $204.52.

 

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Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

 

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