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S&P 500   4,026.12
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Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother

FedEx Will Deliver Better News in 2023

Key Points

  • Management noted that global volumes were soft last quarter
  • The Street is expecting that FedEx will get off to a good start in its new fiscal year
  • FedEx will try to win over investors by taking a more shareholder-friendly stance
FedEx Will Deliver Better News in 2023

One look at FedEx Corporation’s (NYSE: FDX) chart shows that it has been a rough year. With the shipping and logistics leader’s stock down more than 40% since January 1st, investors are left to wonder if things will get better.

Yes and no.

In the near term, FedEx will continue to struggle with the challenges that have caused ‘return to sender,’ or in this case, ‘return to early pandemic levels,’ to be stamped on its shares. 

Longer term, the company will recover. With recession worries mounting, just how much longer is hard to say. What we do know though is that FedEx has faced similar rough patches before only to climb to fresh record highs.

Why is FedEx Stock Falling?

Last month, FedEx provided some early Halloween fright when it warned that current quarter earnings would be weak. This came after it posted a 21% EPS decline for its latest quarter that reflected a slowdown in delivery volumes and an increase in fuel and wage expenses. 

Management noted that global volumes were soft last quarter and that things got progressively worse as the period wore on. FedEx Express, the company’s biggest segment, recorded an 11% volume slump largely due to weakness in Asia and Europe. FedEx Ground revenue fell short of internal expectations by $300 million. Add in an expectation that things could further deteriorate in the current quarter and FedEx shareholders rushed to the exits. 

How Will FedEx Perform in 2023?

Since FedEx has an unusual fiscal calendar, we have to look forward to the company’s fiscal 2024 to get a glimpse of what’s coming in calendar 2023. The Street is expecting that FedEx will get off to a good start in its new fiscal year. Compared to last quarter’s dud, the consensus forecast for Q1 EPS implies 25% year-over-year growth.


This means that we may have to endure a few more ugly quarters before the market regains confidence in FedEx. While ‘less negative’ earnings declines in coming periods may attract buyers, more than likely a return to growth mode will be necessary for the FedEx bleeding to stop.

For all of fiscal 2024, the consensus EPS forecast sits at around $18. Although well below last year’s bottom line, this equates to 25% full-year growth. Of course, this estimate is subject to significant change, but it could set the stage for a return to the excellent EPS figures that FedEx flashed during the pandemic e-commerce boom.

How will it get there? By next fall, interest rate hikes will probably be over and we may even see rate decreases. If the Fed has its way, inflation will be significantly lower by then and consumer purchasing power will be enhanced. This means that FedEx should benefit from improved e-commerce activity and business confidence that together will boost shipping volumes. And since FedEx is implementing rate hikes of its own as of January 2nd, top line performances should improve alongside the economy.

The outlook for the expense side of the ledger is murkier. That’s because volatile oil prices are hard to predict. Lately, recession worries and the strong dollar have prompted a crude selloff. But with the Russian-Ukraine war ongoing and other geopolitical risks swirling, the extent to which fuel expenses eat into FedEx profits is a wildcard. So too is the potential for wage pressures.

Having less frequent flights, closing select sort facilities, and cutting back on Sunday deliveries are additional measures the FedEx has discussed to improve profitability. It's uncertain which levers will be pulled, but it is comforting to know that some things remain in the company’s control.

What is FedEx’s Long-Term Growth Strategy?

To be bullish about FedEx shares at this juncture, you have to still believe in the new management team’s five-year plan. In the Q1 call, CEO Raj Subramaniam expressed confidence that the company’s 2025 financial targets are still in reach. These include:

  1. annual revenue growth of 4% to 6%
  2. a 10% operating margin led by 20%-plus margins at FedEx Freight and
  3. annual EPS growth of 14% to 19%.

It is optimism that the Street is taking with a grain of salt. That’s because prior to the recent earnings warning, FedEx management gave a bright outlook that quickly proved to be unfounded. 

As it tries to get back on course, FedEx will try to win over investors by taking a more shareholder-friendly stance. With a nudge from an activist investor, the company has been aggressively raising its dividend and buyback program. Following a 53% dividend increase, FedEx shares currently offer a yield north of 3%.

Banking the dividend payments and waiting for things to turn around may not be a bad move here, but it’ll require patience. The good news is the downside appears limited and, whereas many industrials are saddled with high debt, FedEx’s balance sheet strength will be a big factor in its eventual recovery.

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 "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
FedEx (FDX)
3.1222 of 5 stars
$176.70+0.2%2.60%13.05Moderate Buy$207.16
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