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The Zacks Analyst Blog FedEx, United Parcel Service and Air Transport
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For Immediate Releases
Chicago, IL – September 16, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: FedEx Corp. (FDX - Free Report) , United Parcel Service (UPS - Free Report) and Air Transport Services (ATSG - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Play FedEx Stock Ahead of Q1 Earnings?
FedEx Corp. 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.
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, it lags that of another industry player, Air Transport Services.
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.
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog FedEx, United Parcel Service and Air Transport
For Immediate Releases
Chicago, IL – September 16, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: FedEx Corp. (FDX - Free Report) , United Parcel Service (UPS - Free Report) and Air Transport Services (ATSG - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Play FedEx Stock Ahead of Q1 Earnings?
FedEx Corp. 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.
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 seethe 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, it lags that of another industry player, Air Transport Services.
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.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.