For investors, 2021 is essentially on the books. Full-year earnings estimates for most companies won’t change much from this point. What’s more important now is the outlook for 2022. Investors will soon get an important look at the year ahead, starting with
(ticker: FDX) reports its fiscal results for the first quarter of 2022 on September 21 after the market closes to trading. The parcel delivery giant will also update its annual guidance, including the important holiday shipping season, and will run through May 2022.
Today the company is doing well, but as always the market is forward looking. Investors, as well as Wall Street, are not as optimistic as they have been about the company in recent months.
FedEx forecast adjusted earnings per share of $21 for fiscal year 2022 in June, when management issued its first guidance for the coming fiscal year, an increase in earnings of approximately $18 per share for fiscal year 2021. Analysts were slightly more optimistic than that, with earnings forecasted at about $21.16 a share in 2022. But estimates are beginning to fall, with consensus forecasts for earnings for fiscal 2022 falling to about $21 a share. There’s something in the street.
JP Morgan analyst Brian Ossenbeck assesses Buy stocks, but he also shows some nerves. The analyst lowered its price target for the stock to $346 per share, from $366 earlier in September. In addition, he tells customers to “stay on the sidelines” when publishing quarterly results. There are too many questions right now, he says, such as whether rising labor costs will hurt profit margins and how the stock will respond to slowing e-commerce growth.
Ossenbeck prefers to wait until later in the year to fill positions. At that point, the labor cost situation will be better understood and holiday shipping surcharges – meaning higher prices for FedEx services – will be in full effect. He expects $4.75 per share in fiscal profit in the first quarter and sees that rise to $5.16 per share in the fiscal second quarter of 2022.
Cowen analyst Helane Becker also reviews stock buying. Like Ossenbeck, she wants FedEx management to address the labor situation during the seasonal busiest time of the year. Becker points out that FedEx will add about 50,000 employees to meet peak demand.
She forecasts $5.05 in fiscal earnings per share for the first quarter, slightly ahead of Ossenbeck and slightly ahead of The Street’s consensus forecast of $4.88 per share. Becker’s price target for the stock is $335, while the average analyst price target is about $340 per share. That implies an increase of about 30% from recent levels, but the average target price, like earnings estimates, has also fallen, from about $350 a share in June.
The stock, after an epic 2020, also reflects that recent downward shift in sentiment. Coming Friday, FedEx stock has been roughly flat this year, trailing the respective gains of 19% and 14% of the
Dow Jones industrial average.
Shipper shares rose 72% in 2020 as Covid-19 reduced the number of planes in the sky – reducing shipping capacity – and increased demand for online shopping.
Now there is a new set of questions about labor costs and the impact of rising prices on the demand for FedEx services. The answers to those questions will likely determine the direction of FedEx stocks for the coming months. It will also give investors an idea of how labor and demand issues will affect other companies in 2022 as well.
Write to Al Root at email@example.com