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Here's Why Investors Should Give FedEx (FDX) a Miss Now
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FedEx Corporation (FDX - Free Report) is currently embroiled in a complex web of challenges, a situation that we believe has significantly dampened its appeal as an investment option.
Let’s delve deeper.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 10.1% downward over the past 90 days. For the current year, the consensus mark for earnings has moved 3% south in the same time frame. The bearish alterations in estimate revisions underscore a notable decline in brokers' confidence in the stock.
Weak Zacks Rank and Style Score: FedEx currently carries a Zacks Rank #4 (Sell). The company’s current Momentum Score of F shows its short-term unattractiveness.
Unimpressive Price Performance: FDX has fallen 9% in the past three months compared with its industry’s decline of 5.3%.
Image Source: Zacks Investment Research
Other Headwinds: Due to a decline in shipping demand, particularly in Asia and Europe, volumes are being hurt at FedEx. As a result, it 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 dipped 4%. With the resumption of economic activities, e-commerce demand is shrinking from the levels witnessed during the peak of the pandemic. This is likely to hit revenues at FDX further, which is already suffering due to the global volume weakness.
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 an weakness in demand. This might hit FDX's long-term growth prospects.
Bearish Industry Rank: The industry to which FDX belongs currently has a Zacks Industry Rank of 239 (of 252). Such an unfavorable rank places FDX in the bottom 5% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
GATX currently carries a Zacks Rank #2 (Buy) and has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the past four quarters and missed once. The average beat is 16.47%.
The Zacks Consensus Estimate for GATX’s 2024 earnings has been revised 9% upward over the past 90 days. It has an expected earnings growth rate of 6.5% for 2024. Shares of GATX have risen 26% in the past year.
SkyWest's fleet modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26.3% over the past 90 days. Shares of SkyWest have surged 242.3% in the past year. SKYW currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has an expected earnings growth rate of more than 100% for 2024. SKYW delivered a trailing four-quarter earnings surprise of 128.02%, on average.
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Here's Why Investors Should Give FedEx (FDX) a Miss Now
FedEx Corporation (FDX - Free Report) is currently embroiled in a complex web of challenges, a situation that we believe has significantly dampened its appeal as an investment option.
Let’s delve deeper.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 10.1% downward over the past 90 days. For the current year, the consensus mark for earnings has moved 3% south in the same time frame. The bearish alterations in estimate revisions underscore a notable decline in brokers' confidence in the stock.
Weak Zacks Rank and Style Score: FedEx currently carries a Zacks Rank #4 (Sell). The company’s current Momentum Score of F shows its short-term unattractiveness.
Unimpressive Price Performance: FDX has fallen 9% in the past three months compared with its industry’s decline of 5.3%.
Image Source: Zacks Investment Research
Other Headwinds: Due to a decline in shipping demand, particularly in Asia and Europe, volumes are being hurt at FedEx. As a result, it 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 dipped 4%. With the resumption of economic activities, e-commerce demand is shrinking from the levels witnessed during the peak of the pandemic. This is likely to hit revenues at FDX further, which is already suffering due to the global volume weakness.
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 an weakness in demand. This might hit FDX's long-term growth prospects.
Bearish Industry Rank: The industry to which FDX belongs currently has a Zacks Industry Rank of 239 (of 252). Such an unfavorable rank places FDX in the bottom 5% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector are GATX Corporation (GATX - Free Report) and SkyWest (SKYW - Free Report) .
GATX currently carries a Zacks Rank #2 (Buy) and has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the past four quarters and missed once. The average beat is 16.47%.
The Zacks Consensus Estimate for GATX’s 2024 earnings has been revised 9% upward over the past 90 days. It has an expected earnings growth rate of 6.5% for 2024. Shares of GATX have risen 26% in the past year.
SkyWest's fleet modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26.3% over the past 90 days. Shares of SkyWest have surged 242.3% in the past year. SKYW currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has an expected earnings growth rate of more than 100% for 2024. SKYW delivered a trailing four-quarter earnings surprise of 128.02%, on average.