FedEx stock forecast: is FedEx stock a good buy?

Can FedEx continue to deliver, or will it be held up?

FedEx has had a pretty good couple of years, but are storm clouds on the horizon for the delivery service?

Recovery from COVID

FedEx has performed well during the Covid-19 pandemic. The coronavirus sparked an unprecedented shift to online retail as shops around the world were forced to close. Merchants had to become exceedingly agile to make their businesses step up and honour unprecedented e-commerce sales. Holding everything together were logistics companies, who ensured that packages landed on doorsteps in good time, FedEx being one of them.

Results were encouraging and led to some pretty upbeat FedEx stock predictions. For instance, in the third quarter of the 2021 financial year, covering the three months to 28 February, total revenue came in at $21.5bn. 

That was the second consecutive quarter where revenue broke $20bn. It marked a 23% increase on the same period in 2020, before the full impact of the coronavirus pandemic was felt. Perhaps more remarkably, in the third quarter FedEx’s net income hit $892m, 183% higher than the same period in 2020. All of this correlated to earnings a share of $3.30, up 175%.

However, after a year of recovery and growth, the fourth quarter of the financial year was a time of comparative consolidation. Revenue stood at $22.6bn, which was up 23% annually, while operating income was up 278% to $1.8bn. 

FedEx chief executive Fred Smith called the company’s work over the pandemic its “finest hour”. He said:

“Fiscal ’21 was truly unprecedented, and we are enormously proud of our 570,000 team members who performed magnificently to keep global health care, industrial and at-home supply chains open and, more recently, allowed significant additional commerce to flow.”

Staff shortages

There were concerns about the company’s ability to hire and retain staff in the market, which meant punctuality targets were being missed.

The company’s COO, Rajesh Subramaniam, said:

“We are facing challenges with labour availability, which have contributed to recent service levels that do not meet our own high expectations of the quality we expect to deliver to our customers. The inability to hire team members, particularly package handlers, has driven wage rates higher and creates inefficiency in our networks as we use overtime to cover open shifts and route volume around known constraints. We're taking bold actions across the business to address service issues and prepare for sustained volume increases, including continued investments in people, capacity and technology to optimize our networks.”

 

Labour problems have hit FedEx’s reputation pretty badly, with Supply Chain Management Review reporting that data from delivery tracker Convey found that in March the company had an on time delivery rate of 75%, significantly below UPS (86%) and USPS (90%).

The markets were unimpressed by FedEx’s results. Earnings of $5.01 a share missed targets set by some analysts. The FedEx stock price took a hit, dropping from $303.76 when the market closed on 24 June to $287.70 when it opened the following day, a fall of almost 5.3%.

Going forward

What does all that mean for the FedEx stock forecast? Looking back to late June 2020, we see that the current share price is more than double what it was then. Something to keep in mind for the FedEx stock forecast for 2021 and beyond lies in how the company experienced a reversal of fortunes over the past few years. Between December 2018 and August 2020, the price stood below $200. Many analysts are confident that the sharp rise in demand for delivery services will remain long after the pandemic has passed, with retailers investing aggressively in e-commerce, and figures suggesting that the move away from bricks-and-mortar stores could prove irreversible.

Although there’s going to be plenty of turbulence as the world starts to return to normal, shopping habits have changed substantially in recent months. Given that there’s a lot of pent-up demand among consumers right now, with many managing to build their savings during the pandemic, FedEx could experience a further uptick in demand as restrictions start to ease, which would help the FDX stock forecast.

FedEx recently estimated that US domestic deliveries will reach 101 million packages a day in 2022, with 86% of this growth coming from the e-commerce sector.

So what of the future? Of 26 analysts polled by CNN for their FedEx stock forecast, there’s a potential high, believed to have been predicted by Thomas Wadewitz of UBS, of $397 a share in a year’s time, which would be a rise of around 33% from the stock’s current value. While the median outcome is $362.50, up by about 21%, a low forecast, reportedly from Ravi Shanker of Morgan Stanley, of $270, represents a drop of about 9%. It is worth noting that the widespread indicates that, at the time of writing, FedEx may not be the easiest stock to predict.

CNN also polled 30 analysts, 21 of whom tipped FedEx as a buy. Three said they expect the stock to outperform, five said investors should hold onto their stock for the time being, and one said it would underperform. 

It’s important to remind you that investing can be a risky business. FedEx is a good example of how share prices can move against you. We’ve seen its shares fall below $200 and stay there for more than 18 months. Always remember that the price of shares can go down as well as up, and you should never invest more money than you can afford to lose. Also, please be aware that a FedEx stock price prediction might well end up being inaccurate.

Trade Fedex - FDX shares price

Fedex
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Low: 226.4
High: 228.81

FAQs

A lot will depend on how people respond to the end of pandemic-related restrictions. There appears to be consensus that consumers will rely on online shopping and deliveries more, which would benefit the FedEx stock forecast. However, people may go back to physical retail, which would damage the company’s business. Likewise, other companies might come up with better deals for businesses and customers. You need to do your own research before making a decision.

It is according to GuruFocus, a website which specialises in finding which stocks are over- and under-valued. The site says that the fair price of FedEx stock should be somewhere around the $250 mark, which means that it’s currently overvalued.

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