FedEx Corporation (FDX) in Memphis, Tenn., is the second-largest delivery services company (in terms of revenue) in the United States. It is ranked #45 on the Fortune 500 list. Today, the company announced that it plans to repurchase $1.50 billion worth of shares from Goldman Sachs Group Inc. (GS) as part of an accelerated share repurchase agreement. FDX is poised to buy back 4.80 million shares at the market price from GS initially. The remaining shares are expected to be purchased on a discounted basis.

The accelerated share repurchase program is part of the company’s plans to buy back $5 billion worth of shares, which it announced on December 16. This is in addition to 2.30 million shares available for repurchase under its 2016 share repurchase agreement. FDX has repurchased approximately $750 million worth of shares so far this year, as of December 16, 2021. The share repurchase agreement is expected to boost ROE and EPS for existing shareholders.

Shares of FDX have gained 1.2% in price over the past month and 1.6% over the past five days, outperforming the benchmark S&P 500 index, which retreated over this period.

Here is what could shape FDX’s performance in the near term:

Stable Growth Prospects

Analysts expect FDX’s revenues to rise 8.9% in the current quarter (ending February 2022), 10.6% in the current year, and 3.7% next year. The consensus EPS estimates indicate a 36.3% year-over-year improvement in the current quarter, a 13.8% rise in the current year, and a 9.9% increase next year. Furthermore, the Street expects FDX’s EPS to rise at a 17.6% CAGR over the next five years.

Value Stock

In terms of forward non-GAAP P/E, FDX is currently at 12.10x, which is 40.8% lower than the 20.43x industry average. Its 0.89 forward non-GAAP PEG multiple is 45.4% lower than the 1.64 industry average, while its 8.70 forward EV/EBITDA multiple is 29.3% lower than the 12.31 industry average.

In addition, the stock’s 0.71  and  7.12 respective forward Price/Sales and Price/Cash Flow ratios are significantly lower than the 1.58 and 15.33 industry averages.

Consensus Rating and Price Target Indicate Potential Upside

Of the 22 Wall Street analysts that rated FDX, 18 rated it Buy, while four rated it Hold. The 12-month median price target of $310.71 indicates a 24.1% potential upside. The price target ranges from a low of $260.00 to a high of $345.00.

POWR Ratings Reflect Rosy Prospects

FDX has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Quality and Value. FDX’s 21.34% trailing-12-month ROE is 57.10% higher than the 13.58% industry average, which is in sync with its Sentiment grade. The stock’s lower-than-industry valuation metrics are in sync with the Value grade.

Of 15 stocks in the A-rated Air Freight & Shipping Services industry, FDX is ranked #6.

In total, we rate FDX on eight distinct levels. Beyond what we have stated above, we have rated FDX for Growth, Sentiment, Stability, and Momentum. Get all FDX ratings here.

Bottom Line

FDX has been leveraging robust demand amid strong consumer spending to boost its financials. In its fiscal 2022 second quarter, ended November 30, 2021, FDX’s revenues increased 14.1% year-over-year to $23.50 million. Its operating income increased 9% year-over-year to $1.60 billion. This can be attributed to strong revenue growth and effective cost management. Given the heightened demand for its services this holiday season, we think the company is well-positioned to deliver strong earnings in the current quarter. Thus, FDX is an ideal investment now.

How Does FedEx Corporation (FDX) Stack Up Against its Peers?

FDX has an overall POWR Rating of B, which equates to a Buy rating. This rating is superior to its peers within the Air Freight & Shipping Services Industry, such as Expeditors International of Washington, Inc. (EXPD), Air T, Inc. (AIRT), and Cargojet Inc. (CGJTF), which all are rated C (neutral).

FDX shares were trading at $246.22 per share on Monday afternoon, down $4.10 (-1.64%). Year-to-date, FDX has declined -4.12%, versus a 22.39% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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