On today’s U.S. Breakouts report, there are 26 stocks on the positive breakouts list (stocks with positive price momentum), and two securities are on the negative breakouts list (stocks with negative price momentum).
The focus is a stock that surfaced on the positive breakouts list after the company reported better-than-expected earnings results on Friday that sent the share price soaring 6 per cent higher on significant volume. With 15 recent buy recommendations, the security highlighted is FedEx Corp. (FDX-N).
A brief outline is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
The company
Headquartered in Memphis, FedEx is an industry leader with its transportation services delivering packages worldwide.
Quarterly earnings
After the market closed on March 18, the company reported better-than-expected third-quarter financial results (the company’s fiscal year end is May 31) that sent the share price soaring 6 per cent the following day on high volume with nearly 13-million shares traded. T
he three-month historical daily average trading volume is approximately 2.9 million shares. The company reported adjusted earnings per share of US$3.47, exceeding the consensus estimate of US$3.22.
On the earnings call, Chief Financial Officer Mike Lenz said, “Adjusted operating profit increased 120 per cent and adjusted operating margin increased 210 basis points, primarily due to strong volume growth in U.S. domestic residential package, a 41-per-cent increase in FedEx International Priority package volume led by Asia and Europe and solid execution of our revenue management strategies in the face of increasing demand across all our transportation segments.”
On the call, Chief Marketing and Communications Officer Brie Carere indicated that this operational strength is expected to continue fueled by e-commerce growth, saying: “The U.S. domestic parcel market is expected to grow to 101 million packages a day by calendar year 2022 with e-commerce contributing 86 per cent of total U.S. market growth. E-commerce as a percentage of U.S. retail sales was approximately 21 per cent in Q4 [fourth quarter] of calendar year ’20, significantly above the pre-pandemic level. We remain excited about the diversification and evolution of the e-commerce market. Some of our largest retail customers reported e-commerce growth rates in the high double and even triple digits through 2020. As the U.S. reopens, we recognize the potential for a short-term deceleration in e-commerce shopping. However, we are very confident that e-commerce, as a percentage of retail, has a long growth runway.”
Dividend policy
The company pays its shareholders a quarterly dividend of 65 US cents per share or US$2.60 per share yearly, equating to a current annualized yield of 0.9 per cent.
The company has maintained its dividend at this level since mid-2018.
Analysts’ recommendations
According to Bloomberg, 15 analysts have issued buy recommendations, eight have issued neutral recommendations and two sell recommendations since the beginning of the year.
Financial forecasts
The consensus earnings per share estimates are US$17.80 in 2021, rising 10 per cent to US$19.54 the following year.
The Street’s earnings forecasts have been rising. To illustrate, four months ago, the Street was forecasting earnings per share of US$15.66 in 2021 and US$17.05 in 2022.
Valuation
According to Bloomberg, the shares are trading at a P/E (price-to-earnings) multiple of 14.3 times the 2022 consensus estimate, above its five-year historical average P/E multiple of 12.8 times but below its peak forward multiple during this time period of nearly 18 times.
The average 12-month target price is US$330.58, implying the share price has 18 per cent upside potential over the next year.
Insider transaction activity
Year-to-date, there has only been one transaction reported by an insider.
According to Bloomberg, director Kim Jabal sold 3,000 shares at an average price per share of approximately US$256.89. Proceeds from the sale exceeded US$770,000, not including commission charges.
Chart watch
Year-to-date, the share price has increased nearly 8 per cent.
Looking at key resistance and support levels, the stock has an initial ceiling of resistance around US$300, near its all-time closing high of US$301.45 reached in Dec. 2020. Looking at the downside, there is strong technical support around US$250, close to its 50-day moving average (at US$254.80).
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from two major U.S. indexes, the Dow Jones Industrial Average as well as the S&P 500.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
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Jennifer Dowty