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The US economy added 165,000 jobs in October, a stronger result than many analysts expected. This rebound follows a slower stretch in September and suggests that consumer and business spending remains healthy despite higher interest rates.
For a delivery giant like FedEx, a strong job market is a direct signal of shipping demand. When more people are working and businesses are hiring, the volume of packages moving through the network typically stays high. This economic backdrop helps support the company's recent move to raise shipping rates without losing customers.
Source: Fox Business
HSBC set its price target for the delivery giant at $370, which is roughly 15 percent higher than where the stock trades today. This move comes after the company recently raised its sales outlook and reported better delivery volumes. While this is a single firm's view, it sits notably higher than the average analyst target of $302. It suggests that some on Wall Street see more room for the stock to rise as the company continues to merge its separate delivery networks to save on costs.
Source: HSBC
Oil prices fell on Monday as diplomatic talks between the U.S. and Iran reduced concerns about potential supply disruptions in the Middle East. This drop reversed much of the price climb seen last week.
For a company like FedEx, fuel is one of the largest single expenses. While the company uses surcharges to pass some fuel costs to customers, lower prices at the pump and for jet fuel generally make its massive delivery network more profitable to run. This move helps support the company's broader effort to lean out its costs while merging its delivery networks.
Source: WSJ
FedEx now expects its revenue to grow by about 12 percent for the calendar year. This update follows a period where the company has successfully raised shipping prices while seeing more packages move through its network.
This higher target suggests that the company's plan to merge its delivery networks is not slowing down its ability to win business. For a long-term owner, this is a sign that FedEx still has the pricing power to pass on higher costs to customers without losing them to rivals.
Source: WSJ
After FedEx reported its October results, we raised our quality score to 3.9 out of 5 and now rate its growth prospects and its ability to handle technological change more highly. We moved our call from Buy to Watch. We have added the separation of the freight business and the sale of the supply chain division to what we track. We also added the cost of hiring outside transportation to our risks, which we now expect to climb as shipping rates rise.
Management has a clear habit of setting targets they can beat, having cleared their own profit estimates in seven of the last eight quarters. This suggests a team that has a firm handle on its costs even as it merges its massive delivery networks.
| Expectation | |
|---|---|
| EPS | $6.43 |
| Revenue | $25.51B |