FedEx Earnings: PE Still Cheap to Growth, Freight Spinoff Adds to Valuation Story

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Fedex Corporation Notícia

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Stocks Analysis by Brian Gilmartin covering: FedEx Corporation. Read Brian Gilmartin's latest article on Investing.com

Tuesday night, June 25th, 2024 after the closing bell, and the stock rose $39 or 15% yesterday, June 26th, on heavy volume as FedEx disclosed on page 2 of the earnings release that “FedEx Freight has announced plans to further optimize its operations and match capacity with demand through planned permanent closure of 7 freight facilities…FedEx management and the Board of Directors are conducting an assessment of the role of FedEx Freight in the company’s portfolio structure and potential steps...

FCF spiked dramatically during Covid, peaking at $4.25 billion in the May ’21 quarter. It ended the May ’24 fiscal year at $3.13 billion.Here’s a little simple math being done to get to peak EPS for FedEx: If FedEx stock trades up to $325, with a $24.50 EPS estimate, it’s still trading at just 13x EPS. That assumes too just a small improvement in the operating margin and no additional shares repurchased.FedEx consolidated guided to $5.2 billion in capex for fiscal ’25, which is exactly where fiscal ’24 came in , but fiscal ’24 was down 16% from fiscal ’23. It’s hard to say if the Freight facility closures are already in fiscal ’25 capex, or perhaps they are not material.

Here’s this blogs internal spreadsheet on Freight’s financial history: note the improvement in operating margin.Summary / conclusion: The expected revenue growth over the next 3 years has returned to positive growth, versus negative y-o-y declines.

 

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