Overview of FedEx Corporation (FDX) earnings release for the 2nd quarter of their 2022 fiscal year
Category: FedEx Corporation (FDX)
Date: 20 December 2021 Stock Price of Fedex (FDX): $250.32 Market Capital of Fedex (FDX): $66.5 billion We take a look at the 2nd quarter earnings release of their 2022 fiscal year of FedEx Corporation one of the world's leading logistics services companies. For their 2nd quarter 2021 Fedex reported revenues of $23.5 billion and net income of $1.3 billion.
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Our operating income increased during the quarter, thanks to the enormous efforts of our team members. We are nearing the finish line of another robust peak shipping season, and we salute our more than 600,000 team members worldwide for their dedication in delivering the holidays to our customers - Frederick W. Smith, FedEx Corp. chairman and chief executive office"
About FedEx Corporation
FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenue of $90 billion, the company offers integrated business solutions through operating companies competing collectively, operating collaboratively and innovating digitally under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 600,000 team members to remain focused on safety, the highest ethical and professional standards and the needs of their customers and communities. FedEx is committed to connecting people and possibilities around the world responsibly and resourcefully, with a goal to achieve carbon-neutral operations by 2040.
Overview FedEx's 2nd quarter 2022 earnings report
2nd quarter 2022 2nd quarter 2021
- Revenue: $23.5 billion $20.6 billion
- Operating income: $1.68 billion $1.51 billion
- Operating margin: 7.1% 7.4%
- Net income: $1.30 billion $1.30 billion
- Diluted EPS: $4.83 $4.83
FedEx's management commentary on their 2nd quarter 2022 earnings
MEMPHIS, Tenn., December 16, 2021 ... FedEx Corp. today reported financial results for the quarter ended November 30.
“Our operating income increased during the quarter, thanks to the enormous efforts of our team members. We are nearing the finish line of another robust peak shipping season, and we salute our more than 600,000 team members worldwide for their dedication in delivering the holidays to our customers,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer.
“FedEx operating income grew in our second quarter, driven by strong revenue growth and effective management of our cost and expected labor availability challenges,” said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer. “While adjusted earnings per share was unchanged year over year, this year’s effective tax rate was significantly higher, as last year’s earnings included a $0.71 per share tax benefit.”
“Our operating income increased during the quarter, thanks to the enormous efforts of our team members. We are nearing the finish line of another robust peak shipping season, and we salute our more than 600,000 team members worldwide for their dedication in delivering the holidays to our customers,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer.
“FedEx operating income grew in our second quarter, driven by strong revenue growth and effective management of our cost and expected labor availability challenges,” said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer. “While adjusted earnings per share was unchanged year over year, this year’s effective tax rate was significantly higher, as last year’s earnings included a $0.71 per share tax benefit.”
"Strategic investments that we have made to our networks and systems have enabled us to provide critical delivery capacity and supply chain expertise to support the needs of our customers, while also making it possible for us to capitalize on the growing e-commerce parcel market,” said Raj Subramaniam, FedEx Corp. president and chief operating officer.
Share Repurchase Program
The FedEx Corp. Board of Directors has authorized a new $5 billion share repurchase program. The new program is in addition to the share repurchase program announced in 2016 authorizing the repurchase of up to 25 million shares, of which 2.3 million shares remain available for repurchase.
As part of the share repurchase programs, the company intends to enter into a $1.5 billion accelerated share repurchase program (ASR). Approximately 80% of the shares to be repurchased under the ASR will be received by FedEx at the ASR agreement’s inception. The final number of shares to be repurchased under the ASR will be based on a discount to the average of the daily volume-weighted average stock prices for Rule 10b-18 eligible transactions in FedEx’s common stock during the term of the ASR. Purchases under the ASR are expected to be completed prior to the end of FedEx’s current fiscal year. FedEx may continue to repurchase shares in the open market from time to time subject to market and other conditions.
The company has repurchased approximately $750 million of FedEx common stock fiscal year-to-date, and ended the quarter with $6.8 billion in cash.
Outlook
FedEx is unable to forecast the year-end fiscal 2022 mark-to-market (MTM) retirement plans accounting adjustment. As a result, FedEx is unable to provide a fiscal 2022 earnings per share or effective tax rate (ETR) outlook on a GAAP basis.
FedEx is revising its earnings forecast for the fiscal year to reflect second quarter results and outlook for the second half of the fiscal year, as well as the anticipated share count change which will result from the ASR:
These forecasts assume continued growth in U.S. industrial production and global trade, a gradual improvement in labor availability, no additional COVID-19-related business restrictions, successful completion of the anticipated ASR, and current fuel price expectations. FedEx’s ETR and earnings per share forecasts are based on current law and related regulations and guidance.
“The company’s new share repurchase program demonstrates our expectation of strong profit and cash flow performance in FedEx’s fiscal second half, and our commitment to delivering long-term value for stockholders,” said Lenz. “Our focus remains on continued revenue quality improvement while managing our cost headwinds and labor availability challenges. We continue to forecast improved earnings and margins for our fiscal year.”
Share Repurchase Program
The FedEx Corp. Board of Directors has authorized a new $5 billion share repurchase program. The new program is in addition to the share repurchase program announced in 2016 authorizing the repurchase of up to 25 million shares, of which 2.3 million shares remain available for repurchase.
As part of the share repurchase programs, the company intends to enter into a $1.5 billion accelerated share repurchase program (ASR). Approximately 80% of the shares to be repurchased under the ASR will be received by FedEx at the ASR agreement’s inception. The final number of shares to be repurchased under the ASR will be based on a discount to the average of the daily volume-weighted average stock prices for Rule 10b-18 eligible transactions in FedEx’s common stock during the term of the ASR. Purchases under the ASR are expected to be completed prior to the end of FedEx’s current fiscal year. FedEx may continue to repurchase shares in the open market from time to time subject to market and other conditions.
The company has repurchased approximately $750 million of FedEx common stock fiscal year-to-date, and ended the quarter with $6.8 billion in cash.
Outlook
FedEx is unable to forecast the year-end fiscal 2022 mark-to-market (MTM) retirement plans accounting adjustment. As a result, FedEx is unable to provide a fiscal 2022 earnings per share or effective tax rate (ETR) outlook on a GAAP basis.
FedEx is revising its earnings forecast for the fiscal year to reflect second quarter results and outlook for the second half of the fiscal year, as well as the anticipated share count change which will result from the ASR:
- Earnings per diluted share of $18.25 to $19.25 before the year-end MTM retirement plans accounting adjustment, compared to the prior forecast of $18.25 to $19.50 per diluted share, which did not include the second quarter MTM retirement plans accounting adjustments;
- Earnings per diluted share of $20.50 to $21.50 before (i) the year-end MTM retirement plans accounting adjustment, and excluding (ii) estimated TNT Express integration expenses, (iii) estimated costs associated with business realignment activities, and (iv) the second quarter fiscal 2022 MTM retirement plans accounting adjustments, compared to the prior forecast of $19.75 to $21.00 per diluted share;
- ETR of approximately 24% prior to the year-end MTM retirement plans accounting adjustment; and
- Capital spending of $7.2 billion.
These forecasts assume continued growth in U.S. industrial production and global trade, a gradual improvement in labor availability, no additional COVID-19-related business restrictions, successful completion of the anticipated ASR, and current fuel price expectations. FedEx’s ETR and earnings per share forecasts are based on current law and related regulations and guidance.
“The company’s new share repurchase program demonstrates our expectation of strong profit and cash flow performance in FedEx’s fiscal second half, and our commitment to delivering long-term value for stockholders,” said Lenz. “Our focus remains on continued revenue quality improvement while managing our cost headwinds and labor availability challenges. We continue to forecast improved earnings and margins for our fiscal year.”
FedEx (FDX) stock price chart over the last 5 years
The image below shows the stock price history of FedEx (NYSE: FDX) over the last 5 years. And it's been a good time for FedEx stockholders. Over the last 5 years the stock of Fedex has provided investors with a pretty strong return of 51.5% p
The stock of FedEx trading at a lot closer to its 52 week high than it is to its 52 week low of which to us is a clear indication that the short term sentiment and momentum of the stock is relatively positive at this point in time.
The stock of FedEx trading at a lot closer to its 52 week high than it is to its 52 week low of which to us is a clear indication that the short term sentiment and momentum of the stock is relatively positive at this point in time.
FedEx (NYSE: FDX) latest stock valuation
So based on FedEx (FDX) latest earnings report and their outlook provided what do we value FedEx's stock at? Based on their latest earnings and the outlook provided by the group our target price (full value price) for FedEx is sitting at $305.20 a stock (up slightly from our 2Q 2021 earnings report review of FedEx). We therefore believe the stock of FedEx is undervalued
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $305.20 Therefore we believe the a good entry point into the stock is below $274.70.
We expect the stock of FedEx to kick up slightly in coming weeks and months to levels closer to our target price. Since it is trading at well below our target price we rate the stock of FedEx as a buy
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $305.20 Therefore we believe the a good entry point into the stock is below $274.70.
We expect the stock of FedEx to kick up slightly in coming weeks and months to levels closer to our target price. Since it is trading at well below our target price we rate the stock of FedEx as a buy
Next earnings release of FedEx
It is expected that FedEx (FDX) will release their 3rd quarter 2022 earnings report in late March 2022