After mixed quarterly results, Real Money Columnist Stephen ‘Sarge’ Guilfoyle views this industry player as a trading vehicle rather than as an investment.
Shipping and logistics remain challenging as supply chain bottlenecks and employment issues continue in 2022 amid the global pandemic.
That much was clear from the latest results of a big player in the space.
FedEx’s (FDX) – Get FedEx Corporation Report Express division recently reported its operating results rose due to higher yields, a net fuel benefit and lower variable compensation expense. But the company faced employees being out sick due to the spread of the Omicron variant of the SARS-CoV-2 coronavirus and shipping demand.
FedEx Ground operating results fell mostly because rates rose for purchased transportation and employee wages, network inefficiencies and expansion-related costs. The shipping company was able to offset the decline by higher revenue per package, two additional ground commercial operating weekdays and a net fuel benefit.
The division that reported the best earnings was FedEx Freight where operating results nearly tripled with revenue per shipment here rising by 19% while average daily shipments increased 2%.
Trading the stock is key, Real Money Columnist Stephen “Sarge” Guilfoyle argued in a recent Real Money column.
“As we know, FDX earnings tend to always be an adventure,” Guilfoyle wrote recently on Real Money. “This is one reason why, though I am often long both United Parcel Service (UPS) – Get United Parcel Service, Inc. Class B Report (I am long right now), and FDX (I am not long right now), if asked… I would say that I am invested in UPS and that I trade FDX.”
The company’s performance during its fiscal third quarter was not bad, according to Guilfoyle. For the three month period ending February 28, FedEx reported adjusted EPS of $4.59 on revenue of $23.6 billion. FedEx’s adjusted earnings number shows a 32% year over year growth, but did not meet expectations.
The company’s debt level has been rising. Currently its ratio is 1.39, which is “healthy enough,” Guilfoyle wrote.
“Long-term debt is up from three months ago, while the entry for goodwill is down small,” he wrote. “This balance sheet does get a passing grade. I would prefer to see a greater effort to work down that debt load.”
Analysts remain fairly happy with FedEx, Guilfoyle noted.
“It appears that while these earnings have not provoked any significant ratings changes, there are a couple of cuts being made to price targets,” he wrote. “The average price target across the five is $277.60, with a high of $285 (Jack Atkins of Stephens) and a low of $270 (Christian Wetherbee of Citigroup).”
