When FedEx Corporation (NYSE:FDX) released its most recent earnings update (28 February 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well FedEx has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see FDX has performed.
How Well Did FDX Perform?
FDX’s trailing twelve-month earnings (from 28 February 2019) of US$3.6b has declined by -19% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 22%, indicating the rate at which FDX is growing has slowed down. Why could this be happening? Well, let’s look at what’s occurring with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, FedEx has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 7.7% exceeds the US Logistics industry of 5.9%, indicating FedEx has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for FedEx’s debt level, has declined over the past 3 years from 15% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 31% to 93% over the past 5 years.
What does this mean?
FedEx’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. You should continue to research FedEx to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FDX’s future growth? Take a look at our free research report of analyst consensus for FDX’s outlook.
- Financial Health: Are FDX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 28 February 2019. This may not be consistent with full year annual report figures.
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