S&P 500   4,544.90
DOW   35,677.02
QQQ   374.10
S&P 500   4,544.90
DOW   35,677.02
QQQ   374.10
S&P 500   4,544.90
DOW   35,677.02
QQQ   374.10
S&P 500   4,544.90
DOW   35,677.02
QQQ   374.10

FedEx, Another Reason For S&P 500 Investors To Be Very Worried 

Wednesday, September 22, 2021 | Thomas Hughes
FedEx, Another Reason For S&P 500 Investors To Be Very Worried 

Inflation Puts A Dent In The FedEx Earnings Outlook

FedEx's (NYSE: FDX) earnings foreshadow a weak S&P 500 Q3 earnings season. It's still many weeks before the peak of the third-quarter earnings season but this week has been a pivotal moment for the market. FedEx,  and S&P 500 peer Lennar, both reported strong results that are overshadowed by the impact of inflation. Not only is inflation boosting the top-line results but it is cutting into the bottom-line results and outlook and that is very bad for the market. With earnings expectations in decline, investors need to prepare for a big decline in shares of FedEx and the S&P 500. 

“First-quarter operating 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 … In addition, while commercial ground and U.S. domestic express package volume increased year over year, continued supply chain disruptions have slowed U.S. domestic parcel demand compared to the company’s earlier forecast.”

FedEx: The Double-Edged Sword Of High demand 

FedEx had a mostly good quarter supported by robust demand in all segments. The company produced  $22 billion in consolidated revenue which, according to Marketbeat.com data, is good for a gain of 14% over last year. The revenue beat consensus by 65 basis points which raises the first red flag for investors.  The market is expecting or rather needs, the average S&P 500 company to soundly beat its consensus estimates in order to keep rallying. 65 basis points are better than expected but not by enough to really alter the outlook. On a segment basis, results in the ground segment fell versus the prior year as COVID-related tailwinds subside and new headwinds emerge. Results in the commercial segment improved on company efforts to improve profitability enacted in previous years. In both cases, results were impacted by labor shortages that show no signs of ending.

The really bad news however is in regards to the company's profitability. Labor shortages are resulting in higher costs and cutting deeply into the margins. The company reported an adjusted operating margin of only 6.8% compared to 8.2% last year and an expectation for margin expansion. This resulted not only in weaker-than-expected earnings but led the company to reduce its guidance as well. As for earnings, the GAAP $4.09 missed the consensus by $0.78 while the adjusted $4.37 missed the consensus mark by $0.55.

Turning to the guidance, the company did not give guidance for revenue and provides several numbers to look at but the news is not good. In all three comparisons, the company is guiding earnings outlook lower with noticeable weakness at the low end of the range. The company is expecting adjusted earnings in the range of $18.25 to $19.50 versus the prior guidance of $18.90 to $19.90 in one comparison. This is a decrease of 2% at the high end and 3.5% at the low end which opens the door to even weaker earnings in our opinion. And this guidance includes the expectations for rate hikes in the range of 5.9% the 7.9% across the operating network.

The Technical Outlook: FedEx Falls To Key Support

Shares of FedEx are down more than 6% in premarket action following the release of Q1 earnings. The move has the appearance of a market capitulation but there is a risk of a bigger decline. Pre-market action is indicated to open just above the key resistance level of $236 and may fall below that level once the market opens. If price action moves below $236 and closes there this market could be in for another 27% decline. If, however, price action maintains support at or near this level we would expect to see FedEx trend sideways over the next quarter or two. 

FedEx, Another Reason For S&P 500 Investors To Be Very Worried 

FedEx is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

Should you invest $1,000 in FedEx right now?

Before you consider FedEx, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and FedEx wasn't on the list.

While FedEx currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The 5 Stocks Here


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
FedEx (FDX)3.5$232.98+0.1%1.29%12.38Buy$316.41
Compare These Stocks  Add These Stocks to My Watchlist 


Premium Research Tools

MarketBeat All Access subscribers can access stock screeners, the Idea Engine, data export tools, research reports, and other premium tools.

Discover All Access

Market Data and Calendars

Looking for new stock ideas? Want to see which stocks are moving? View our full suite of financial calendars and market data tables, all for free.

View Market Data

Investing Education and Resources

Receive a free world-class investing education from MarketBeat. Learn about financial terms, types of investments, trading strategies and more.

Financial Terms
Details Here
MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research.