North America

Earnings Preview: FedEx Q2 2018 (FDX)

By: Craig Bowles

Overview

FedEx Corporation (FDX) is slated to report 2Q 2018 earnings after the bell on Tuesday, December 19th. The earnings release is expected at approximately 4:15 p.m. ET with a 5:00 p.m. earnings conference call webcast available at FedEx Investor Relations. Results from FedEx are widely seen as a proxy for economic growth and tend to heavily influence the broader market gauges, including the equity index futures.

Outliers & Strategy

Key measures:

  • Adjusted/Non-GAAP Earnings Per Share (EPS): The Street estimate is $2.89 (range $2.65 to $3.04) (Yahoo! Finance). Consensus was $3.15 three months ago. If unavailable, GAAP EPS would be the comparable measure.
  • Revenues: Expectations are for $15.64 bln (range $15.03 bln to $15.96 bln).
  • Adjusted/Non-GAAP Earnings Per Share (EPS) Guidance for 3Q2018 (if available): The current Street estimate is $2.83 (range $2.58 to $3.26).
  • Adjusted Earnings Per Share (EPS) Guidance for FY2018: Company guidance is $12.00 to $12.80. The current Street estimate is $12.47.
  • FedEx P/E of 22.7 compares to a 5-year average of 24.8; P/B of 3.9 compares to a 5-year average of 2.5; P/S of 1.1 compares to a 5-year average of 0.9; P/CF of 14.3 compares to a 5-year average of 9.3. Dividend yield of 0.8% a 0.6% 5-year average.
  • Analysts view FedEx with 22 (11 one year ago) Buy ratings, 5 Hold, and 0 Sell, according to MarketBeat.com.
  • FedEx insiders sold a net 56,494 shares over the last three months and 415,602 shares in the past year (source: NASDAQ.com). In January 2017, the company approved a $2.5 billion stock buyback. Quarterly dividend increased to $0.50 from $0.40 in June.
  • FedEx results could have a large impact on other air delivery and freight service companies, such as UTi Worldwide (UTIW) and United Parcel Services (UPS).
  • FedEx shares have a 1-day average price change on earnings of 4.19%. Options are pricing in an implied move of 4.22% off earnings.

Recent News

  • 12/05: Shares of the major transportation companies surged following the Senate’s approval of the biggest U.S. tax overhaul in three decades, according to a post on Zack’s.com.
  • 11/30: Barclays suggests buying FedEx for the long haul because of ‘generational shift’ to e-commerce, according to a post on CNBC.com.
  • 11/28: Zacks downgraded FedEx to Sell from Hold citing the Jun 27 cyberattack on its subsidiary, TNT Express; Hurricane Harvey; a lowered guidance for fiscal year 2018; a high-leverage ratio; and potential competition from Amazon’s test pilot of a business-to-consumer delivery service, according to a post on Zack’s.com.
  • 11/17: Loop Capital suggests Amazon’s ‘last-mile’ shipping issue could be resolved if it owned FedEx, according to a post on Barron’s.com.
  • 11/13: Goldman Sachs initiated coverage on FedEx with a Buy rating that UPS and expects FedEx earnings may grow 50% in coming years, thanks to growing international business which is being overlooked as investors focus on margin concerns with the Amazon threat, according to a post on Barron’s.com.
  • 11/06: FedEx Corp. and Walgreen Co. announced that FedEx package pickup and drop-off services are now available at more than 7,500 Walgreens locations in all 50 U.S. states.
  • 10/09: Cowen reiterated an Outperform rating on FedEx despite Amazon’s testing a new delivery service, according to a post on Barron’s.com.

Summary

FedEx is in second year in a four-year process of integrating the May 2016 purchase of TNT Express. Loop Capital suggests Amazon should just buy FedEx. The stock price has support from steady buybacks. Analyst bullishness has grown the past year. Insider selling slowed somewhat the past three months. Over the last four quarters, earnings have beaten and missed estimates by an average of 33c. Estimize consensus for a Non-GAAP EPS of $2.90 on revenue of $15.649 bln compares to analyst consensus of $2.89 on revenue of $15.640 bln. Any change in FY2018 guidance would be of interest.

 

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