Analyst Note| Matthew Young, CFA |
FedEx reported mixed fiscal third-quarter (ended February) results, in our view. Consolidated revenue (up 10%) came in slightly short of our expectations as the omicron variant pressured ground and express package volumes (by tempering customer demand), while ground's margin (although up sequentially) fell short of our expected run rate. On the positive side, overall pricing gains were once again solid, Express' EBIT margin was mostly in line, and Freight's LTL operations continued to outperform. Additionally, management reiterated fiscal 2022 adjusted EPS guidance of $20.50-$21.50. Our $258 DCF-derived fair value estimate may come down slightly as we tweak our near-term ground margin assumptions modestly lower, but we don't expect to drastically alter our midcycle model forecasts.