Can FedEx’s share price deliver a post-earnings bounce?

Despite a dip during the March market sell-off, FedEx’s [FDX] share price has been on a strong upwards trajectory since.

On its worst day of trading so far this year, FedEx’s share price closed at $90.49 on 16 March ­ marking a loss of 40.16% year-to-date, and its lowest value since 2013.

Although the delivery company’s recovery initially lagged behind that of both the S&P 500 and the Dow Industrial Average, FedEx’s share price has gone on to soar following the announcement of its Q4 results on 30 June. It has far exceeded the growth of both indices since.

As of its last close on 11 September, FedEx’s share price has risen 50.09% year-to-date to $232.79. This is in stark contrast to the S&P 500’s growth of just 2.55% and the Dow’s loss of 4.17% over the same period.

As the company prepares its first-quarter results for the fiscal year 2021, could good news push FedEx’s share price even higher?

A tough quarter ahead for FedEx’s share price?

When FedEx released its fourth-quarter earnings for the fiscal year 2020, it reported earnings of $2.53 per share, significantly surpassing the Zacks consensus estimate of $1.42, with a 78.17% surprise. The morning after the results were announced on 30 June, FedEx’s share price opened up 13.2% from the previous day's close.

For the quarter ended May 31, FedEx posted revenue of $17.4bn, which beat the Zacks consensus estimate of $16.1bn by 8.07%. While this is relatively positive news, it’s worth pointing out that this was a dip of 2.5% year-over-year.

Even more concerning was FedEx’s bottom line, which plunged 47.3% year-over-year to $907m for the quarter due to a sluggish global economy and increased costs.

In a statement released alongside the results, Frederick Smith, chairman and CEO, said: “Though our fiscal fourth-quarter performance was severely affected by the COVID-19 pandemic, I am extremely proud of the herculean efforts of our team members.”

FedEx also stated in the report that, “virtually all revenue and expense line items were affected by the COVID-19 pandemic during the quarter. While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs to serve.”

Looking ahead to the next earnings call, analysts are expecting FedEx to post earnings of $2.52 per share, which would represent a decline of 17.37% year-on-year.

As for revenue, analysts expect FedEx to have made $17.46bn for the quarter, a 2.4% growth from the same time last year.

For the full year, Zacks expect earnings of $10.52 per share and revenue of $71.15bn — an increase of 10.74% and 2.79%, respectively, from the fiscal year 2020.

FedEx’s share price gets upgraded

In positive news, William Howard, a Berenberg analyst, upgraded his recommendation on FedEx from a Hold to a Buy, with a $280 price target, up from $130. He also downgraded its competitor United Parcel Service [UPS] to a Sell.

Commenting on FedEx’s share price, along with UPS and Deutsche Post, Howard said the three companies had “had a pretty good pandemic so far”, adding that “the market has got overexuberant about e-commerce growth”.

The consensus recommendation among 28 analysts polled by CNN Money is to Buy FedEx. This rating is held by a majority of 15 analysts, with only nine suggesting to Hold the stock, three giving it an Outperform rating and one rating it Underperform.

The median 12-month price target among 22 analysts polled by CNN Money is $225, with a high estimate of $300 and a low of $100. The median price represents a 0.33% increase from FedEx’s share price as of 11 September’s close.