Airfreight and delivery giant FedEx (FDX) posted mixed results for its late Q4 report Tuesday to wrap up its 2023 fiscal year. FedEx stock eased after hours and shares cleared a base prior to the report.
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FedEx earnings fell an average 27% the last three quarters but still managed to top analyst estimates the last two quarters. Sales declines accelerated the past two quarters and missed Wall Street views.
In April, FedEx announced its DRIVE initiative to consolidate its FedEx Express, FedEx Ground, FedEx Services and other operating companies into the single Federal Express Corporation under the FedEx brand. FedEx expects DRIVE to generate $4 billion in permanent cost reductions in 2025 after the transition is fully implemented in June 2024.
A Raymond James note early Tuesday said the initiative will drive better margins, earnings and free cash flow in the coming years. The DRIVE transition, focus on trimming costs and capital allocation, along with a shareholder-friendly capital return program should improve returns, the firm wrote. Raymond James lowered its price target on FedEx stock to 280 from 285 but maintained the outperform rating on shares.
Meanwhile, Jefferies says “all eyes will be on” FedEx’s fiscal 2024 guidance during results this afternoon. Wall Street could react negatively to an “overly optimistic” earnings target from the company, Jefferies wrote in a research note early Tuesday. An EPS guidance “materially north of $20 would be viewed as a stretch-goal,” the firm wrote while a “realistic range” would be between $15 to $21 per share. Jefferies maintained its 230 price target on FedEx stock and its hold rating on the shares.
Earnings
For the Q4 results late Tuesday, FedEx reported a 28% earnings drop to $4.94 per share while revenue fell 10.2% to $21.9 billion. FactSet analysts expected earnings diving to $4.85 per share on $22.55 billion in sales.
Full year adjusted earnings tumbled 27% to $14.96 per share while revenue slipped 3.5% to $90.2 billion. The results topped earnings estimates of $14.80 per share but fell short of sales predictions of $90.88 billion.
For the 2024 fiscal year, FedEx guided adjusted earnings from $16.50 to $18.50 per share on flat to low single digit revenue growth. FactSet analysts forecast fiscal 2024 earnings rising to $18.33 per share on $90.91 billion in sales.
The company also announced Chief Financial Officer Michael Lenz will retire effective July 31, 2023. Lenz will serve as a senior advisor until the end of the year to ensure a smooth transition while FedEx searches for a successor.
FedEx Stock
FDX shares slumped 2.5% in after hours following results. The stock eased about 0.7% during trading Tuesday.
FedEx stock cleared the 235.81 buy point for a flat base on Thursday, then pulled back below that entry. Shares are holding above their 50-day moving average. The current buy zone, which stretches 5% beyond the buy point, extends to 247.60.
FedEx stock bolted nearly 34% higher this year.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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