What FedEx’s Earnings Tell Us About Inflation

FedEx Corporation (NYSE:FDX) reported disappointing fiscal first-quarter earnings last Tuesday, after the close. As a result, the stock fell as much as 8% on Wednesday.

A FedEx (FDX) employee loads a FedEx Express truck in Manhattan.

Source: Antonio Gravante / Shutterstock.com

So, let’s take a deeper dive into FDX’s earnings and see what got the stock into trouble, and what it means for the market.

During the first quarter of fiscal year 2022, revenue rose 13.87% year-over-year to $22.00 billion, 0.48% above the consensus estimates for $21.89 billion. The company also reported earnings per share of $4.37, down 10.26% year-over-year and below analysts’ estimates of $4.92 per share. So, FDX posted an 11.21% earnings miss and a slight revenue surprise.

A major factor weighing on FDX’s earnings was rising inflation. FDX’s operating income declined 9.1% year-over-year to $1.49 billion, down from $1.64 billion in the same quarter a year ago. However, without the issues with inflation, operating earnings would have been closer to $1.94 billion.

Labor issues are also affecting FDX’s business. Company management stated, “First-quarter operating results were negatively affected by an estimated $450 million year-over-year increase in costs due to a constrained labor market.”

The bad news is inflation and labor shortages are taking a toll on business all over the country. Simply put, companies are paying more for less product and don’t have enough staff to execute the business they do have.

Now, FedEx is often seen as a “canary in the coal mine” of the stock market, testing the waters of what is to come. So, what does all this mean for the overall market?

Well, the reality is that while inflation can be a huge problem for subpar companies, it’s actually good news for fundamentally superior companies with growing sales and earnings. The reality is superior stocks are actually great inflation hedges!

Consider this: Stocks are real shares of real businesses, therefore companies that have successful and profitable business models act as life boats during the sinking ship of inflation. A successful company will simply match its prices to the rise of inflation to sustain business. For example, if inflation sends the price of fabric up by 6%, retail companies like Gap, Inc. (NYSE:GPS) or Lululemon Athletica (NASDAQ:LULU) will increase their prices by 6% to make up the difference without changes to their profit margins.

As far as FDX is concerned, I knew to stay away thanks to my Portfolio Grader. FDX is currently D-rated for its Total Grade, making it an automatic sell. It also currently has F-ratings for earnings momentum and for its Quantitative Grade, which measures institutional buying pressure on the stock.

If you’re looking for inflation hedges, I do not think FDX is your best bet. Instead, I would focus on high-quality stocks whose earnings shouldn’t be impacted by the problematic inflation. I reveal six of these stocks in my latest Growth Investor report, The Inflation Survival Guide: Six Stocks to Buy as America Turns Socialist. Click here so you can read it now.

These stocks are a part of elite sectors just on the verge of profit explosion. I run the entire stock market through my exclusive proprietary system every week. And the same six names kept popping up.

As I dug further, I realized these six tech companies were the ultimate inflation-beaters… the ultimate hedges against inflation.

They have proprietary technologies in rising new industries… and they are poised to explode thanks to a flood of federal government tech spending expected to hit the market.

If you’re concerned about beating inflation, even as it rises every year, you need to own these six stocks.

Click here to learn more.


Louis Navellier

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Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

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