Please ensure Javascript is enabled for purposes of website accessibility

Why FedEx Shares Climbed Higher in September

By Lou Whiteman – Oct 2, 2020 at 12:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Strong earnings and projections for a busy holiday season have investors excited.

What happened

Shares of FedEx (FDX 2.66%) gained 14.4% in September, according to data provided by S&P Global Market Intelligence, as the company reported better-than-expected quarterly results. Investors have spent a long time waiting for this company to hit the fast lane, and it appears FedEx is finally delivering.

So what

FedEx shareholders had a miserable 2019 as the company increased spending to build out its infrastructure and automate internal systems. The company had promised a payoff from all of that spending in 2020, but the COVID-19 pandemic added a layer of uncertainty early in the year.

The second half of 2020 has shown steady improvement, with the shares speeding higher in July, August, and now September. The catalyst in September was FedEx reporting fiscal first-quarter earnings of $4.87 per share on revenue of $19.3 billion, beating analyst expectations for earnings of $2.69 per share on revenue of $17.6 billion.

A FedEx plane on the runway.

Image source: FedEx.

Like other transportation companies FedEx has seen expenses go up to fund COVID-19 safety measures, but that cost has been more than offset by higher demand for its services. In the quarter FedEx saw strong volume growth in international shipping, due in part to a lack of competition from passenger airlines, as well as for U.S. residential package delivery.

FedEx spent in 2019 in part with a plan to offer Sunday service, and the added day of service is helping to increase yields on its consumer business.

"Our earnings growth underscores the importance of our business initiatives and investments over the last several years, and, in many ways, the world has accelerated to meet our strategies," CEO Fred Smith said in a statement.

Now what

FedEx shares are now up 183% from their March lows, but I believe the stock still has room to run. On the post-earnings call with investors chief marketing officer Brie Carere said FedEx is preparing for "a peak like no other" this holiday season, as the pandemic continues to push more and more shopping online.

FDX Chart

FDX data by YCharts

The company has shown it can generate earnings through the pandemic. Over the coming quarters I expect to see strong pricing power boost margins and improved free cash flow. FedEx shares can keep on trucking.

Lou Whiteman owns shares of FedEx. The Motley Fool owns shares of and recommends FedEx. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

FedEx Stock Quote
$177.82 (2.66%) $4.61

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.