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Some investors may be deliberating whether to purchase the stock of this transportation heavyweight before Sept. 19 or wait for a better entry point.
The Zacks Consensus Estimate for first-quarter fiscal 2025 earnings was revised downward in the past 60 days and is pegged at $4.87 per share. Additionally, the consensus mark implies a 7% improvement from the year-ago actual. The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $22.12 billion, indicating a 2% uptick from the year-ago actual.
Image Source: Zacks Investment Research
FDX has an impressive earnings surprise history, as reflected in the chart below.
Image Source: Zacks Investment Research
Demand Erosion Likely to Dent FDX’s Q1 Results
FDX continues to struggle due to the normalization of volume and pricing trends in the post-COVID scenario. Geopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations, particularly in Asia and Europe. The resultant weakness in package volumes is likely to have hurt FedEx's revenues in the to-be-reported quarter.
The performance of the Express unit, FDX's largest segment, is likely to have been hurt due to demand-induced volume weakness. We anticipate revenues from the Express unit to inch down 1.1% from fourth-quarter fiscal 2024 actual.
Cost-Cuts to Aid FDX’s Results
Given the post-COVID adjustments in business, FedEx is realigning its costs under a companywide initiative called DRIVE. FDX’s cost-cutting efforts are likely to have aided its bottom-line performance in the quarter under discussion.
These cost-reduction initiatives include reducing flight frequencies, parking aircraft and cutting staff. We are impressed by FDX's efforts to control costs in the face of persistent revenue weakness. We anticipate expenses from salaries and benefits in first-quarter fiscal 2025 to decrease 2.6% from first-quarter fiscal 2024 actual.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for FDX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as FedEx has an Earnings ESP of -3.24% (the Most Accurate Estimate is pegged at $4.71 per share, 16 cents below the Zacks Consensus Estimate) and carries a Zacks Rank #3 at present.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Impressive Price Performance of FDX
Driven by cost-cut initiatives, shares of FDX gained 11.9% in the past six months against its industry’s 7.5% decline. While FDX’s price performance is better than that of rival United Parcel Service (UPS - Free Report) , it lags that of another industry player, Air Transport Services (ATSG - Free Report) .
Image Source: Zacks Investment Research
Fundamental Strength
For long-term investors, a single quarter’s results are not so important. They would rather base their investment decision on the underlying fundamentals.
The comprehensive DRIVE program is aimed at improving the company’s long-term profitability. Driven by the technology-focused consolidation and improved efficiencies, this program is expected to result in $4 billion in cost savings by fiscal 2025.
Management continues paying dividends and buying back shares, which highlights financial bliss. The company announced a 10% increase in its quarterly dividend to $1.38 per share in June 2024.
FDX is also active on the buyback front. It expects to repurchase $2.5 billion of common stock and pay $1.3 billion in dividends in fiscal 2025 despite revenue woes.
Impressive Growth Prospects of FedEx
The Zacks Consensus Estimate for fiscal 2025 earnings per share is currently pegged at $20.82, indicating 1.4% growth from 2024 level. The mark of fiscal 2026 EPS is expected to grow 3.7% from the fiscal 2025 estimate. The company’s long-term (three-to-five years) earnings growth rate is pegged at 13.2%, higher than its industry’s growth of 11.5%.
Wait for a Better Entry Point
While FDX has strong long-term potential, the current market conditions and challenges suggest that now may not be the best time to purchase additional shares. The industry is experiencing a period of uncertainty with supply-chain concerns and fluctuating demand.
Given all the above factors, we believe that investors should refrain from rushing to buy FDX before Sept. 19. Instead, they should monitor the stock closely for a more appropriate entry point.
Image: Bigstock
How Should Investors Play FedEx Stock Ahead of Its Q1 Earnings?
FedEx Corporation (FDX - Free Report) is set to release its first-quarter fiscal 2025 (ended Aug. 31, 2024) results on Sept. 19, after market close.
Some investors may be deliberating whether to purchase the stock of this transportation heavyweight before Sept. 19 or wait for a better entry point.
The Zacks Consensus Estimate for first-quarter fiscal 2025 earnings was revised downward in the past 60 days and is pegged at $4.87 per share. Additionally, the consensus mark implies a 7% improvement from the year-ago actual. The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $22.12 billion, indicating a 2% uptick from the year-ago actual.
FDX has an impressive earnings surprise history, as reflected in the chart below.
Demand Erosion Likely to Dent FDX’s Q1 Results
FDX continues to struggle due to the normalization of volume and pricing trends in the post-COVID scenario. Geopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations, particularly in Asia and Europe. The resultant weakness in package volumes is likely to have hurt FedEx's revenues in the to-be-reported quarter.
The performance of the Express unit, FDX's largest segment, is likely to have been hurt due to demand-induced volume weakness. We anticipate revenues from the Express unit to inch down 1.1% from fourth-quarter fiscal 2024 actual.
Cost-Cuts to Aid FDX’s Results
Given the post-COVID adjustments in business, FedEx is realigning its costs under a companywide initiative called DRIVE. FDX’s cost-cutting efforts are likely to have aided its bottom-line performance in the quarter under discussion.
These cost-reduction initiatives include reducing flight frequencies, parking aircraft and cutting staff. We are impressed by FDX's efforts to control costs in the face of persistent revenue weakness. We anticipate expenses from salaries and benefits in first-quarter fiscal 2025 to decrease 2.6% from first-quarter fiscal 2024 actual.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for FDX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as FedEx has an Earnings ESP of -3.24% (the Most Accurate Estimate is pegged at $4.71 per share, 16 cents below the Zacks Consensus Estimate) and carries a Zacks Rank #3 at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Impressive Price Performance of FDX
Driven by cost-cut initiatives, shares of FDX gained 11.9% in the past six months against its industry’s 7.5% decline. While FDX’s price performance is better than that of rival United Parcel Service (UPS - Free Report) , it lags that of another industry player, Air Transport Services (ATSG - Free Report) .
Fundamental Strength
For long-term investors, a single quarter’s results are not so important. They would rather base their investment decision on the underlying fundamentals.
The comprehensive DRIVE program is aimed at improving the company’s long-term profitability. Driven by the technology-focused consolidation and improved efficiencies, this program is expected to result in $4 billion in cost savings by fiscal 2025.
Management continues paying dividends and buying back shares, which highlights financial bliss. The company announced a 10% increase in its quarterly dividend to $1.38 per share in June 2024.
FDX is also active on the buyback front. It expects to repurchase $2.5 billion of common stock and pay $1.3 billion in dividends in fiscal 2025 despite revenue woes.
Impressive Growth Prospects of FedEx
The Zacks Consensus Estimate for fiscal 2025 earnings per share is currently pegged at $20.82, indicating 1.4% growth from 2024 level. The mark of fiscal 2026 EPS is expected to grow 3.7% from the fiscal 2025 estimate. The company’s long-term (three-to-five years) earnings growth rate is pegged at 13.2%, higher than its industry’s growth of 11.5%.
Wait for a Better Entry Point
While FDX has strong long-term potential, the current market conditions and challenges suggest that now may not be the best time to purchase additional shares. The industry is experiencing a period of uncertainty with supply-chain concerns and fluctuating demand.
Given all the above factors, we believe that investors should refrain from rushing to buy FDX before Sept. 19. Instead, they should monitor the stock closely for a more appropriate entry point.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.