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Why Is FedEx (FDX) Up 13.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for FedEx (FDX - Free Report) . Shares have added about 13.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
FedEx Misses on Earnings in Q3
The company’s earnings (excluding 22 cents from non-recurring items) of $3.03 per share missed the Zacks Consensus Estimate of $3.10. Moreover, the bottom line declined 18.6% on a year-over-year basis. This downside was primarily due to a dismal performance of the company’s major revenue generating segment, FedEx Express.
Quarterly revenues increased 2.9% year over year to $17.01 billion but lagged the Zacks Consensus Estimate of $17.64 billion. The top line benefited from higher volumes across all transportation segments and increased yields at FedEx Ground and FedEx Freight segments.
Operating income (on an adjusted basis) improved 2.1% year over year to $984 million in the reported quarter. Meanwhile, operating margin remained flat at 5.8% in third-quarter fiscal 2019.
Segmental Performance
Quarterly revenues at FedEx Express (including TNT Express) slid 1% to $9 billion due to soft international revenues on sluggish macroeconomic conditions and a weak global trade. Operating income came in at $370 million, up 17% year over year. Also, operating margin inched up to 4.1% from 3.5% in the year-ago quarter.
FedEx Ground revenues increased 9% year over year to $5.26 billion in the period under consideration. Volume growth and higher yields aided this segmental performance. Operating income came in at $577 million, down 6% year over year while operating margin contracted to 11% from 12.7% in the prior-year quarter.
FedEx Freight revenues rose 8% year over year to $1.75 billion. Segmental revenues benefited from higher revenue per shipment and average daily shipments. Also, the segment’s operating income soared 98% to $97 million. Moreover, operating margin expanded 250 basis points to 5.5% in the quarter under review.
Outlook
FedEx now anticipates fiscal 2019 earnings per share in the range of $15.10-$15.90 excluding pension adjustments, TNT Express integration expenses and certain other items (prior view was in the $15.50-$16.60 band).
Capital expenses are still anticipated at $5.6 billion for fiscal 2019 while effective tax rate is now expected between 22% and 23% (previous view: 24-25%). As part of the company’ cost-reduction initiatives, it anticipates a pre-tax charge of $450-$575 million in the fourth quarter of fiscal 2019 on account of a buyout program for U.S.-based employees. However, this program is estimated to generate approximately $225-$275 million in savings during fiscal 2020.
The company expects to incur TNT Express integration expenses of more than $1.5 billion through fiscal 2021. Of the total costs, fiscal 2019 is expected to spend $435 million, lower than the earlier estimate of $450 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.91% due to these changes.
VGM Scores
Currently, FedEx has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise FedEx has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is FedEx (FDX) Up 13.1% Since Last Earnings Report?
It has been about a month since the last earnings report for FedEx (FDX - Free Report) . Shares have added about 13.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
FedEx Misses on Earnings in Q3
The company’s earnings (excluding 22 cents from non-recurring items) of $3.03 per share missed the Zacks Consensus Estimate of $3.10. Moreover, the bottom line declined 18.6% on a year-over-year basis. This downside was primarily due to a dismal performance of the company’s major revenue generating segment, FedEx Express.
Quarterly revenues increased 2.9% year over year to $17.01 billion but lagged the Zacks Consensus Estimate of $17.64 billion. The top line benefited from higher volumes across all transportation segments and increased yields at FedEx Ground and FedEx Freight segments.
Operating income (on an adjusted basis) improved 2.1% year over year to $984 million in the reported quarter. Meanwhile, operating margin remained flat at 5.8% in third-quarter fiscal 2019.
Segmental Performance
Quarterly revenues at FedEx Express (including TNT Express) slid 1% to $9 billion due to soft international revenues on sluggish macroeconomic conditions and a weak global trade. Operating income came in at $370 million, up 17% year over year. Also, operating margin inched up to 4.1% from 3.5% in the year-ago quarter.
FedEx Ground revenues increased 9% year over year to $5.26 billion in the period under consideration. Volume growth and higher yields aided this segmental performance. Operating income came in at $577 million, down 6% year over year while operating margin contracted to 11% from 12.7% in the prior-year quarter.
FedEx Freight revenues rose 8% year over year to $1.75 billion. Segmental revenues benefited from higher revenue per shipment and average daily shipments. Also, the segment’s operating income soared 98% to $97 million. Moreover, operating margin expanded 250 basis points to 5.5% in the quarter under review.
Outlook
FedEx now anticipates fiscal 2019 earnings per share in the range of $15.10-$15.90 excluding pension adjustments, TNT Express integration expenses and certain other items (prior view was in the $15.50-$16.60 band).
Capital expenses are still anticipated at $5.6 billion for fiscal 2019 while effective tax rate is now expected between 22% and 23% (previous view: 24-25%). As part of the company’ cost-reduction initiatives, it anticipates a pre-tax charge of $450-$575 million in the fourth quarter of fiscal 2019 on account of a buyout program for U.S.-based employees. However, this program is estimated to generate approximately $225-$275 million in savings during fiscal 2020.
The company expects to incur TNT Express integration expenses of more than $1.5 billion through fiscal 2021. Of the total costs, fiscal 2019 is expected to spend $435 million, lower than the earlier estimate of $450 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.91% due to these changes.
VGM Scores
Currently, FedEx has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise FedEx has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.