How FedEx’s Valuation Stacks up to Peers after Fiscal 1Q18
There are two types of PE (price-to-earnings) ratios: the trailing PE and the forward PE. The trailing PE ratio uses the last four quarters’ earnings, while the forward PE considers the next four quarters’ estimated earnings. A company’s forward PE ratio denotes the dollars payable today for every dollar over next 12 months per share in earnings.
Interested in AMZN? Don't miss the next report.
Receive e-mail alerts for new research on AMZN
FedEx’s valuation against peers
FedEx’s forward PE multiple of 17.2x is the lowest in the peer group, and the Reuters-surveyed analysts are pegging its next-one-year EPS (earnings per share) growth at 4.4%—the lowest growth among peers. FDX’s loss of revenues due to recent cyberattacks, its integration costs, and damage due to recent hurricanes are all playing a hand in FDX’s future earnings.
Arch-rival UPS has a forward PE multiple of 19.6x—the second-lowest in the peers group. The company’s per-share earnings over next 12 months are estimated to grow 8%. Old Dominion has a PE of 25.1x. Notably, both UPS and ODFL should benefit from the e-commerce sales boom and the higher weight per LTL (less-than-truckload) (XLI) shipments.
XPO commands the highest forward PE of 33.3x. The company has emerged as the second-largest LTL group in the US, after three major acquisitions in the past two years, including Conway and Norbert Dentressangle in Europe. Integration synergies are expected jack up XPO’s next-one-year EPS by a whopping 48%, according to analysts.
SAIA’s forward PE is 27.4x, which is in line with the 26% growth in EPS predicted by analysts over the next one year. ATSG’s pact with Amazon.com (AMZN) to operate the latter’s air transport network recently boosted the stock, and ATSG’s estimated EPS growth of 35% over the next year speaks helps explain its high forward PE multiple of 28.5x.
To be sure, FedEx’s integration of TNT Express with its Express segment could be disrupted by recent events, and this could compel the Memphis-headquartered shipping company to lower its capital expenditure or raise more debt.
In any case, FedEx’s forward earnings could take a beating going forward, and this could possibly halt the upward momentum we’ve seen in the stock over the past year.