fedex stock

FedEx stock was trading higher in US premarket price action today. The company released its fiscal fourth-quarter earnings yesterday after the close of markets. While its earnings were broadly in line, its guidance for the current fiscal year pleased markets.

FedEx reported revenues of $24.4 billion in the quarter ended May, which was higher than the $22.6 billion that it had posted in the corresponding quarter last year. The revenues were slightly below the $24.56 billion that analysts were expecting.

However, the company’s adjusted EPS of $6.87 was one cent higher than what analysts were expecting. FedEx reported an adjusted operating profit margin of 9.2% which was higher than the 8.7% in the corresponding quarter last year. In absolute terms, the adjusted operating profits rose from $1.97 billion to $2.23 billion.

Commenting on the earnings, the company’s newly appointed CEO Raj Subramaniam said, “Our fiscal 2022 financial performance was a result of our team’s ability to adapt to a number of unexpected challenges and is a testament to the FedEx value proposition and the execution of our long-term strategy.”

FedEx Provided Better Than Expected Guidance

For the fiscal year 2023, FedEx expects to post a diluted EPS of $22.45 to $24.45 before the MTM retirement plans accounting adjustments and costs related to business optimization initiatives. It has forecast a capex of $6.8 billion for the year. Overall, the guidance was ahead of what analysts were expecting.

During the earnings call, Subramaniam said, “As CEO, my focus is maximizing total shareholder return, driven by improved revenue quality, higher margins, and a balanced capital allocation strategy.”

Notably, FedEx is working on improving stockholder returns and recently increased its quarterly dividend by 53% to $1.15. The company’s dividend yield is now at a respectable 2%. Amid the broader market sell-off, several analysts have been advising investors to buy dividend stocks.

New Executive Compensation Plan

Earlier this month, FedEx announced a new executive payment plan which included a new performance metric linked to the company’s total shareholder return relative to a broad market index. While companies adopt different executive payment methodologies, Tesla is an exception, and the company’s CEO Elon Musk does not take any fixed salary or bonus from the company. All his compensation is in the form of stock options which is linked to Tesla hitting key financial metrics, including market cap.

Tesla stock has looked weak in 2022 amid the broader market turmoil. The company faced production issues in China in the second quarter and Musk has warned of a tough quarter in a leaked internal email. Notably, Musk has also said that he sees a US recession as inevitable. Other brokerages have also raised their odds of a US recession with Citigroup putting the number at 50%.

FedEx Is Making Its Fleet Zero-Emission

During their earnings call, FedEx also faced questions about how a recession would impact the company. Responding to the question, Subramaniam said that the company is already working on cutting costs. He said, that if required “we will adjust networks. We’ll adjust — take down flights as required. We’ll just match the capacity to demand.” He, however, added while the company currently does not see a prolonged recession as a possibility, it has the flexibility to respond. FedEx’s CFO Mike Lenz highlighted how the company managed the business during the COVID-19 pandemic.

FedEx is also working on making its fleet zero-emission and plans to have all of its fleet electric by 2040. The company recently took the deliveries of 150 electric delivery vehicles from BrightDrop, a startup backed by General Motors.

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