Is FedEx stock a buy or sell after issuing a profit warning?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 22, 2021
  • FedEx shares on Wednesday plunged more than 8% after issuing a profit warning.
  • The company announced its most recent quarterly results Tuesday after markets closed.
  • It also lowered earnings guidance citing rising costs from the constrained labor market in FQ1.

On Wednesday, FedEx Corp (NYSE:FDX) shares plunged more than 8% after issuing a profit warning following Tuesday’s after-hours earnings release. The company reported its most recent quarterly results, missing expectations on earnings.

FedEx posted FQ1 non-GAAP earnings per share of $4.37, missing the consensus Street expectation of $4.92. Its GAAP EPS of $4.09 also missed the average estimate of $4.97, while revenue grew by 14% Y/Y to $22 billion, $140 million better than the average for analyst expectations.

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The company also lowered its full-year 2022 earnings per diluted share guidance to $19.75 to $21.00, down from the previous guidance of $20.50 to $21.50, citing rising costs due to the constrained labor market.

Is it time to double down FedEx growth prospects?

Before FedEx’s latest earnings report, analysts had predicted its earnings per share to grow by 276% this year before rising at an average annual rate of 13.11% over the next five years. 

However, the latest events may have changed the picture, triggering a review of current earnings expectations. Therefore, the FDX stock may not be as appealing to growth investors as it was before its FQ1 results. 

Nonetheless, the stock still trades at an attractive P/E ratio of 13.68, making it a compelling option for value investors. As a result, although the long-term outlook seems highly unpredictable following the company’s profit warning, it could still be a good short-term buy.

Source – TradingView

Is FedEx stock poised for a rebound after pullback?

Technically, FedEx shares seem to have recently plunged to the oversold conditions of the 14-day RSI. However, the stock price also appears to have found solid trending support, creating an opportunity for a rebound.

Therefore, with shares still trading at significantly low price-earnings ratios, Wednesday’s sharp decline could be an opportunity to buy the stock in the short term. As a result, investors could target profits at about $248.41 or higher at $263.25. 

On the other hand, if the price continues to fall, FDX could find support at $216.60 or lower at $202.25.

Bottom line: it could be time to buy FDX before the rebound

In summary, although FedEx’s profit warning could scare some investors, its attractive valuation could be compelling to value investors. 

Moreover, with shares plunging to oversold conditions, investors with open short positions could look to take some profits, triggering a rebound. Therefore, it could be time to add FDX stock to your portfolio ahead of the rebound.

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