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FedEx (FDX) Up 0.7% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for FedEx (FDX - Free Report) . Shares have added about 0.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FedEx due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at FedEx in Q4
FedEx's fourth-quarter fiscal 2024 earnings per share (excluding 53 cents from non-recurring items) of $5.41 beat the Zacks Consensus Estimate of $5.34 and improved 9.5% year over year. Revenues of $22.109 billion fell short of the Zacks Consensus Estimate of $22.115 billion but grew 0.8% from the year-ago quarter’s reported figure.
Operating income, on a reported basis, increased 3% to $1.555 billion from the year-ago quarter’s reported number. Operating margin improved to 7.0% from 6.9% in the year-ago reported quarter. The upside marked lower structural costs as the company continued to execute its DRIVE program.
Operating expenses (reported basis) increased 1% to $20.554 billion.
Segmental Performance
FedEx Express segment’s revenues grew 0.1% year over year to $10.417 billion. Operating income of the segment fell 53% year over year, owing to lower international yields, partially offset by reduced structural costs from DRIVE initiatives and higher U.S. domestic package yields. During the reported quarter, FedEx Express permanently retired certain aircraft and related engines as part of its fleet modernization program.
FedEx Ground segment’s revenues increased 2% year over year to $8.494 billion due to higher yield and volume growth. The actual figure was lower than our estimate of $8.807 billion. Operating income grew 10% year over year, owing to reduced structural costs resulting from DRIVE initiatives, increased yield, lower self-insurance costs, and growth in ground commercial volume.
FedEx Freight revenues grew 2% from the year-ago quarter’s reported figure to $2.306 billion. The actual figure was lower than our estimate of $2.377 billion. The segment’s operating income rose 13% year over year owing to higher yield and effective cost management. FedEx Freight has announced plans to further optimize its operations and match capacity with demand through the planned permanent closure of seven facilities.
Average daily shipments stayed almost flat year over year. Capital expenditures for fourth-quarter fiscal 2024 were $1.20 billion.
Liquidity
FedEx exited fourth-quarter fiscal 2024 with cash and cash equivalents of $6.501 billion compared with $5.644 billion at the prior-quarter end. Long-term debt (less current portion) was $20.135 billion compared with $20.122 billion at the end of the prior quarter.
During fiscal 2024, FedEx returned almost $3.8 billion to shareholders which includes $2.5 billion through share repurchases and $1.3 billion in the form of dividend payments.
Fiscal 2025 Outlook Impressive
FDX expects revenues to grow in low-to-mid single-digit percentage year over year. EPS is expected to be in the range of $18.25-$20.25 before the MTM retirement plans accounting adjustments and $20.00 to $22.00 after excluding costs related to business optimization initiatives. FDX now anticipates capital spending of $5.2 billion in fiscal 2025. Effective tax rate is still estimated to be 24.5%. For fiscal 2025, FedEx anticipates repurchasing $2.5 billion of common stock, including $1 billion during the fiscal first quarter
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, FedEx has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, FedEx has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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FedEx (FDX) Up 0.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for FedEx (FDX - Free Report) . Shares have added about 0.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FedEx due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at FedEx in Q4
FedEx's fourth-quarter fiscal 2024 earnings per share (excluding 53 cents from non-recurring items) of $5.41 beat the Zacks Consensus Estimate of $5.34 and improved 9.5% year over year. Revenues of $22.109 billion fell short of the Zacks Consensus Estimate of $22.115 billion but grew 0.8% from the year-ago quarter’s reported figure.
Operating income, on a reported basis, increased 3% to $1.555 billion from the year-ago quarter’s reported number. Operating margin improved to 7.0% from 6.9% in the year-ago reported quarter. The upside marked lower structural costs as the company continued to execute its DRIVE program.
Operating expenses (reported basis) increased 1% to $20.554 billion.
Segmental Performance
FedEx Express segment’s revenues grew 0.1% year over year to $10.417 billion. Operating income of the segment fell 53% year over year, owing to lower international yields, partially offset by reduced structural costs from DRIVE initiatives and higher U.S. domestic package yields. During the reported quarter, FedEx Express permanently retired certain aircraft and related engines as part of its fleet modernization program.
FedEx Ground segment’s revenues increased 2% year over year to $8.494 billion due to higher yield and volume growth. The actual figure was lower than our estimate of $8.807 billion. Operating income grew 10% year over year, owing to reduced structural costs resulting from DRIVE initiatives, increased yield, lower self-insurance costs, and growth in ground commercial volume.
FedEx Freight revenues grew 2% from the year-ago quarter’s reported figure to $2.306 billion. The actual figure was lower than our estimate of $2.377 billion. The segment’s operating income rose 13% year over year owing to higher yield and effective cost management. FedEx Freight has announced plans to further optimize its operations and match capacity with demand through the planned permanent closure of seven facilities.
Average daily shipments stayed almost flat year over year. Capital expenditures for fourth-quarter fiscal 2024 were $1.20 billion.
Liquidity
FedEx exited fourth-quarter fiscal 2024 with cash and cash equivalents of $6.501 billion compared with $5.644 billion at the prior-quarter end. Long-term debt (less current portion) was $20.135 billion compared with $20.122 billion at the end of the prior quarter.
During fiscal 2024, FedEx returned almost $3.8 billion to shareholders which includes $2.5 billion through share repurchases and $1.3 billion in the form of dividend payments.
Fiscal 2025 Outlook Impressive
FDX expects revenues to grow in low-to-mid single-digit percentage year over year. EPS is expected to be in the range of $18.25-$20.25 before the MTM retirement plans accounting adjustments and $20.00 to $22.00 after excluding costs related to business optimization initiatives. FDX now anticipates capital spending of $5.2 billion in fiscal 2025. Effective tax rate is still estimated to be 24.5%. For fiscal 2025, FedEx anticipates repurchasing $2.5 billion of common stock, including $1 billion during the fiscal first quarter
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, FedEx has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, FedEx has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.