FedEx Corp. (FDX) exceeded profit and revenue expectations in the fourth quarter lifting shares by almost 9% in extended market trading on Tuesday.
The stock rose to $152.50 in after-market trading as the U.S. package company said it benefited from an increase in home deliveries, while people stayed at home during the coronavirus pandemic.
Adjusted profit dropped by 50% to $663 million, or $2.53 per share, in the quarter ended May 31 year-on-year. Revenue declined to $17.4 billion from $17.8 billion during the same period. This compares with analysts’ expectations of a profit of $1.52 per share on revenue of $16.4 billion.
FedEx said that the pandemic affected all revenue items during the quarter. As a result commercial volumes were down significantly due to the business closures across the globe, which were partly offset by a surge in residential e-commerce deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs. The company also posted a $125 million increase in operating costs due to protective equipment and safety supplies, as well as additional security and cleaning services.
“Our fiscal fourth quarter performance was severely affected by the COVID-19 pandemic,” said FedEx chairman and CEO Frederick W. Smith. “Our team members…delivered peak-level e-commerce volumes in the U.S. As a result of the strategic investments we have made to enhance our capabilities and efficiencies, FedEx is well positioned to support and benefit from the reopening of the global economy.”
Looking ahead, FedEx said that is not providing an earnings forecast for fiscal 2021. However, the package delivery company said that the the COVID-19 pandemic is expected to continue to negatively impact its near-term operating performance.
Shares in FedEx have advanced some 55% since reaching a low in March but they are currently still trading down about 7% year-to-date.
Ahead of the earnings, Citigroup analyst Christian Wetherbee raised the stock’s price target to $160 from $140 and reiterated a Buy rating, as he believes that the “worst is almost over” and that investor sentiment is “beginning to warm back up”.
Wetherbee noted that although the company’s fiscal Q4 results will likely be “very challenging,” investors should start to look beyond into mid-fiscal 2021 for a rebound in profitability, which is likely to drive shares in the intermediate term.
Overall, analysts have a cautiously optimistic Moderate Buy consensus on the stock, with 6 Buy ratings offset by 9 Hold ratings. Meanwhile, the $143.36 average analyst price target indicates a mere 2% upside potential from current levels. (See FDX stock analysis on TipRanks).
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