FedEx Corporation, a prominent American multinational conglomerate, operates in various segments of the transportation and delivery services industry. These segments include FedEx Express, FedEx Ground, FedEx Freight, FedEx Services, and more. As the company prepares to report its earnings for the fiscal quarter ending in August 2023, this article provides insights into FedEx's financial performance, industry trends, and technical analysis.
Industry Overview: Global Courier & Delivery Services
The global courier and delivery services industry have experienced challenges in recent years, with a compound annual growth rate (CAGR) declining at -5% over the past five years. Despite a robust annual revenue exceeding $460 billion in 2021 (a notable 11.8% year-on-year increase), driven by the e-commerce surge during the pandemic, the industry has faced headwinds. Factors such as declining shipping volumes, rising oil prices, and increased operational costs have contributed to a decline in profitability. In fact, average profits for courier and delivery services companies are anticipated to reach their lowest point since 2009.
FedEx's Financial Performance
FedEx has encountered challenges in recent quarters, with declining sales revenue being a noteworthy trend. The most recent quarterly sales revenue stands at $21.93 billion, down from $24.39 billion in the same period the previous year. Although the operating margin decreased from 9.2% to 8.1% year-on-year, it remained relatively strong throughout the fiscal year. This favorable outcome can be attributed to the company's efficient expense management and its DRIVE transformation initiative, which focuses on enhancing efficiency in pick-ups, transportation, and package deliveries.
Despite challenges such as cost inflation and weakened demand, FedEx has partially offset these headwinds through cost reduction measures and improvements in local package yield.
Analyst Expectations and Technical Analysis
Consensus estimates for FedEx's sales revenue remain steady at $21.8 billion, aligning with management's outlook. However, earnings per share (EPS) are expected to decline by over 25% to $3.70 compared to the previous quarter, when EPS stood at $3.44 during the same period last year. From a technical perspective, FedEx's share price has exhibited resilience, recovering over 60% of losses incurred between May 2021 and September 2022. The stock price recently retraced towards the support level of $251.50, with a session high of $270.22.
A potential break below this support could lead to a focus on the next support levels at $239.90 and $230.50. Conversely, a bullish move above $270.22 would signal the continuation of the upward trend, with potential resistance levels at $281.40 and the psychological level of $300.
In conclusion, FedEx Corporation faces industry headwinds and quarterly challenges, including declining sales revenue and reduced EPS. The technical analysis suggests potential support and resistance levels to watch. As FedEx reports its earnings, investors will closely monitor the results to gain insights into the company's financial health and future prospects in the competitive global courier and delivery services sector.