Why FedEx Stock Has Risen More Than 13% in 2021 | The Motley Fool

What happened

FedEx (NYSE:FDX) stock has climbed 13.57% so far this year. It began the year at $253.19 and closed at $294.82 on Monday. It’s down a little from its high point of $319.90 that it reached on May 27.

On June 24, the company announced its 2021 fiscal full-year earnings, with reported revenue of $84 billion, up 21.3% year over year. It also reported $5.23 billion of net income, compared to $1.29 billion in fiscal 2020.

Despite what were obviously strong numbers, the transportation stock has fallen a bit since the report from a high of $304.59 on the day of the report to a low of $291.24 on July 7. Why did the investors react with a collective yawn? A big concern among investors is the company’s rising labor costs, something FedEx alluded to in its fourth-quarter earnings call.

Image source: Getty Images.

So what

Because FedEx stock was around $160 before the pandemic hit and because of its ensuing growth, some look at the company as a pandemic stock, but the growth in e-commerce continues to drive the company’s earnings.

The company said it expects full-year revenue of $90 billion in 2021, representing a growth of only 7%. That may not be what investors wanted to hear after the big increase in 2020, but it shows the company is still on the right track. Over the past year, it has increased cash from operations 41.10%.

FDX Cash from Operations (TTM) Chart

FDX Cash from Operations (TTM) data by YCharts

Now what

The growth in the demand for same-day product delivery will continue to buoy and bedevil shipping companies such as FedEx.

The impact of the pandemic is still being felt with supply chain difficulties being commonplace. What that means is that it will take increased spending on the part of shippers to keep up with competitors. The company clearly isn’t sitting on its hands. On July 16, it announced that its subsidiary, FedEx Express, was making a $100 million investment in Delhivery, a shipping company in India. Delhivery will sell FedEx Express products and services in India as part of the agreement.

At its current share price, FedEx still appears to be a buy. Its price-to-earnings (P/E) ratio of 19.42 is well below the 35.52 P/E of competitor United Parcel Service.

The company also made itself more attractive to income-oriented investors by raising its quarterly dividend 15% to $0.75 per share, giving it a yield of 1.93% at Monday’s share price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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