FedEx Corporation (NYSE:FDX) is reaping the benefits of its robust liquidity as well as the investor-friendly actions it has taken. On the other hand, sluggish demand is a headwind for FedEx stock.

Things Working in FDX’s Favor 

The liquidity situation of FedEx is strong. Notably, the current ratio of the company, which is a measure of liquidity, was calculated to be 1.32 at the conclusion of the third quarter of the fiscal year 2023. If the current ratio for the company is greater than one, this implies that the assets of the company will be sufficient to pay off the liabilities that are due at the end of the year.

In addition to this, the business finished the third quarter of the fiscal year 2023 with a cash and equivalents balance of $5,373 million, which is significantly greater than its current debt balance of $147 million.

Even though these are challenging times, we are happy with the efforts that the company is doing to reward its shareholders. FedEx increased its quarterly dividend by 53% in June 2022, bringing it to $1.15 per share (which is equivalent to $4.60 annually). Also, FDX is very active in the buyback market. FedEx repurchased shares with a value of $2.2 billion during its fiscal year 2022. FedEx stock has jumped nearly 25% year-to-date.

Key Risk

FDX reduced its forecast for fiscal 2023 capital expenditures to $5.9 billion (down from the previous expectation of $6.3 billion), citing sluggish demand as the primary factor. The company’s long-term growth prospects could be hurt as a result of this.

American Airlines (NASDAQ:AAL) and United Airlines (NASDAQ:UAL) are two companies that are ranked higher than FedEx.

American Airlines is profiting from the increased demand for air travel, which is good news for the company. AAL exceeded the Consensus Estimate for profits per share in the fourth quarter of 2022 by 2.63%, reporting earnings of $1.17 per share for the period.

On a year-over-year basis, it is anticipated that AAL’s earnings will exhibit year-over-year growth rates of 100.4% for the first quarter of 2023 and 332% for the whole year 2023.

The demand for domestic and recreational air travel has been steadily improving, which is good news for United Airlines. In the final three months of 2022, UAL turned a profit thanks to an increase in the number of passengers who took to the skies. UAL recorded their third consecutive profitable quarter with its fourth-quarter results.

The management anticipates that the total revenue per available seat mile would increase by 25% year over year for the first quarter of 2023. This growth will be driven by strong demand. It is predicted that total revenues will expand by a factor of 50% year over year. The Consensus Estimate for full-year earnings in 2023 indicates that there will be a 227% increase from the previous year.

Featured Image: Unsplash @ Bannon Morrissy

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