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Here's Why You Should Hold FedEx (FDX) Stock in Your Portfolio
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FedEx Corporation’s (FDX - Free Report) consistent efforts to reward shareholders through dividends and buybacks are encouraging. However, shipping volume-related weakness is a headwind.
Let’s delve deeper.
Factors Working in Favor of FDX
We are pleased with the company’s efforts to reward its shareholders even in these difficult times. In April 2023, FedEx raised its quarterly dividend by 10% to $1.26 per share (or $5.04 annually). FDX is also active on the buyback front. During fiscal 2023, FedEx repurchased shares worth $1.5 billion.
FedEx's liquidity position is solid. Notably, the company's current ratio, a measure of liquidity, was pegged at 1.34 at the end of second-quarter fiscal 2024. A current ratio of more than 1 indicates that the company's assets will be able to cover its debts that are due at the year end. The reading also compares favorably with its industry's 1.24.
To navigate the weaker-than-expected business environment, FDX is limiting expanses. Cost-cut initiatives are likely to drive the bottom line in this era of demand weakness. DRIVE initiatives are likely to result in $1.8 billion of cost savings in fiscal 2024.
FDX has gained 39% in a year compared with its industry’s 1.2% growth.
Image Source: Zacks Investment Research
Factors Ailing FDX
Due to a decline in shipping demand, particularly in Asia and Europe, volumes are being hurt. As a result, FedEx reported lower-than-expected earnings per share and revenues in second-quarter fiscal 2024. The Express unit, FDX's largest segment, was badly hit, with segmental revenues declining 6% year over year, due to volume woes. FedEx freight revenues declined 4%
With the resumption of economic activities, e-commerce demand is shrinking from the levels witnessed during the peak of pandemic. This is likely to hit revenues at FDX, which is already suffering due to global volume weakness, further.
In fiscal 2023, capital expenditures were $6.1 billion. FDX anticipates capital spending of approximately $5.7 billion in fiscal 2024. The lower outlook is mainly due to demand weakness. This might hit FDX's long-term growth prospects.
RYAAY is benefiting from the buoyant air-traffic scenario post Covid. Traffic grew 11% to 105.4 million during the first half of fiscal 2024. On the back of the robust traffic scenario, RYAAY’s profit after tax was €2.18 billion during the first half of fiscal 2024, up 59% year over year. Ryanair expects fiscal 2024 traffic to be183.5 million.
SKYW's fleet modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for 2024 earnings increased 3.5% in the past 60 days.
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Here's Why You Should Hold FedEx (FDX) Stock in Your Portfolio
FedEx Corporation’s (FDX - Free Report) consistent efforts to reward shareholders through dividends and buybacks are encouraging. However, shipping volume-related weakness is a headwind.
Let’s delve deeper.
Factors Working in Favor of FDX
We are pleased with the company’s efforts to reward its shareholders even in these difficult times. In April 2023, FedEx raised its quarterly dividend by 10% to $1.26 per share (or $5.04 annually). FDX is also active on the buyback front. During fiscal 2023, FedEx repurchased shares worth $1.5 billion.
FedEx's liquidity position is solid. Notably, the company's current ratio, a measure of liquidity, was pegged at 1.34 at the end of second-quarter fiscal 2024. A current ratio of more than 1 indicates that the company's assets will be able to cover its debts that are due at the year end. The reading also compares favorably with its industry's 1.24.
To navigate the weaker-than-expected business environment, FDX is limiting expanses. Cost-cut initiatives are likely to drive the bottom line in this era of demand weakness. DRIVE initiatives are likely to result in $1.8 billion of cost savings in fiscal 2024.
FDX has gained 39% in a year compared with its industry’s 1.2% growth.
Image Source: Zacks Investment Research
Factors Ailing FDX
Due to a decline in shipping demand, particularly in Asia and Europe, volumes are being hurt. As a result, FedEx reported lower-than-expected earnings per share and revenues in second-quarter fiscal 2024. The Express unit, FDX's largest segment, was badly hit, with segmental revenues declining 6% year over year, due to volume woes. FedEx freight revenues declined 4%
With the resumption of economic activities, e-commerce demand is shrinking from the levels witnessed during the peak of pandemic. This is likely to hit revenues at FDX, which is already suffering due to global volume weakness, further.
In fiscal 2023, capital expenditures were $6.1 billion. FDX anticipates capital spending of approximately $5.7 billion in fiscal 2024. The lower outlook is mainly due to demand weakness. This might hit FDX's long-term growth prospects.
Zacks Rank & Key Picks
FedEx currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Transportation sector may consider better-ranked stocks like Ryanair Holdings (RYAAY - Free Report) and SkyWest (SKYW - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
RYAAY is benefiting from the buoyant air-traffic scenario post Covid. Traffic grew 11% to 105.4 million during the first half of fiscal 2024. On the back of the robust traffic scenario, RYAAY’s profit after tax was €2.18 billion during the first half of fiscal 2024, up 59% year over year. Ryanair expects fiscal 2024 traffic to be183.5 million.
SKYW's fleet modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for 2024 earnings increased 3.5% in the past 60 days.