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What happened
FedEx (NYSE: FDX) the stock has climbed 13.57% so far this year. It started the year at $ 253.19 and closed at $ 294.82 on Monday. It’s down a bit from its high of $ 319.90 which it hit on May 27.
On June 24, the company announced its annual results for fiscal 2021, with reported revenue of $ 84 billion, up 21.3% year-over-year. It also reported net profit of $ 5.23 billion, up from $ 1.29 billion in fiscal 2020.
Despite clearly strong numbers, transport stock has edged down since the report, going from a high of $ 304.59 on report day to a low of $ 291.24 on July 7. Why did investors react with a collective yawn? A big concern among investors is the company’s rising labor costs, which FedEx alluded to in its call for fourth quarter earnings.
Image source: Getty Images.
So what
Because FedEx stock was around $ 160 before the start of the pandemic and due to the growth that has resulted from it, some view the business as pandemic stock, but the growth of e-commerce continues to boost company profits.
The company said it expects annual revenue of $ 90 billion in 2021, growing only 7%. This might not be what investors wanted to hear after the sharp increase in 2020, but it shows the company is still on the right track. Over the past year, it has increased operating cash flow by 41.10%.
FDX Cash from Operations (TTM) data by YCharts
Now what
Growth in demand for same-day product delivery will continue to support and disrupt shipping companies such as FedEx.
The impact of the pandemic is still being felt, with supply chain difficulties rife. This means that it will take increased expenses on the part of shippers to keep pace with their competitors. The business is clearly not sitting on its hands. On July 16, it announced that its subsidiary, FedEx Express, was making a $ 100 million investment in Delhivery, a shipping company in India. Delhivery will sell FedEx Express products and services in India under the agreement.
At its current price, FedEx still appears to be a buy. Its price / earnings (P / E) ratio of 19.42 is well below the competitor’s 35.52 P / E United parcel service.
The company has also made itself more attractive to income-oriented investors by increasing its quarterly dividend from 15% to $ 0.75 per share, giving it a return of 1.93% over the share price of Monday.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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