FedEx Stock Price Falls 5% – Time to Buy FDX Stock?

FedEx (FDX) stock was trading almost 5% lower in US premarket price action today despite posting better than expected earnings. Is it time to buy FDX stock?

FedEx stock is up 17% so far in 2021 and is outperforming the S&P 500. The stock is up almost 120% over the last year which is much higher than what the S&P 500 has delivered over the period. However, the stock is now down 5% from the 52-week highs and looks set to tumble today looking at the premarket price action.

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FedEx Stock Technical Analysis

FedEx stock had found support at its 100-day SMA (simple moving average). Earlier this week, it managed to cross the 50-day SMA which is currently at $298.92. However, looking at the premarket carnage, the stock could fall below the 50-day SMA today which could be a bearish sign. The stock meanwhile trades comfortably above the 200-day SMA. Its 14-day RSI (relative strength index) is at 55 which is a neutral indicator.

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FDX Stock Recent developments

FDX reported its fiscal fourth-quarter 2021 earnings yesterday after the close of US markets. The company reported revenues of $22.57 billion in the quarter which were ahead of the $21.51 that analysts were expecting. The company’s adjusted EPS of $5.01 was also ahead of the $4.99 that analysts were forecasting. However, despite the earnings beat, the stock was trading lower in premarkets today.

FedEx reports a steep rise in revenues

In the last fiscal year, FedEx’s revenues were over 21% higher than the previous fiscal year. This is the highest topline growth that the company has delivered in the last many years. Meanwhile, rising inflation seems to be hurting FDX and it expects to post adjusted EPS of $18.90-$19.90 in the fiscal year 2022. The guidance was below the $20.37 that analysts polled by Refinitiv were expecting. Commenting on the guidance, FedEx said, “These forecasts assume continued recovery in U.S. industrial production and global trade, no additional COVID-19-related business restrictions, and current fuel price expectations.”

Rising wage costs amid labor shortages in the US and the steep rise in gas prices are headwinds for FedEx stock. “Higher wage rates and lower productivity, particularly in the (current fiscal) first quarter, and this is reflected in our overall outlook for the year,” said FedEx CFO Mike Len.

FDX Stock: Long term risks and opportunities

The growing popularity of e-commerce is an opportunity for FedEx and the company is investing to ramp up the capacity. The company is forecasting capital expenditure of $7.2 billion for the fiscal year 2022 and cited e-commerce as a strategic priority. However, as customers like Amazon ramp up their own fleet and deliveries, FDX faces a challenge as well. Amazon has placed an order of 100,000 electric vans from electric vehicle startup Rivian as it ramps up its logistics.

FedEx Stock Price Forecast

According to the estimates compiled by MarketBeat, FedEx has an average target of $333.96 which is a premium of almost 10% over current prices. The stock has 22 buys, three hold, and one sell rating.

Several analysts have boosted their target price on FDX stock this month. Earlier this week, Barclays increased its target price from $360 to $375 while Stifel resumed the coverage on the stock with a buy rating and a target price of $339.

Barclays is bullish on FDX stock

“We expect strong results and a likely resumption of favorable forward guidance should help lift FedEx shares later this week. …. Nonetheless, with UPS committing to improving pricing and customer mix in the US package business along with a lower capital spending outlook, we see favorable market dynamics for the more growth- oriented FedEx,” said Barclays while reiterating its overweight rating on the stock.

Stifel resumed coverage with a buy rating

Stifel is also optimistic about the company’s e-commerce business and said “We are resuming coverage of FedEx with a Buy rating and target price of $339. We believe FedEx is in a strong position to capitalize on secular macroeconomic tailwinds, including a significant pull-forward of global e-commerce trends,”

Credit Suisse, Raymond James, Morgan Stanley, and Stephens are the other brokerages that have boosted the target price for FedEx this month.

FedEx Stock Valuation

FedEx stock currently trades at an NTM (next-12 months) PE multiple of 14.8x. The multiple has averaged 16.4x, 13.6x, and 14.3x, over the last one year, three years, and five years respectively. The valuation multiples look in line with the long-term averages even as they have come off the recent highs.

Overall, today’s dip could be a good opportunity to buy the dip in FedEx stock. FDX is a good way to play the economic recovery as well as the growing penetration of e-commerce.

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