Can FedEx Deliver With Next Tuesday’s Q2 Results?
Spreadex | Dec 12, 2018 10:28
It hasn’t been a great year for the courier service. After shooting to an all-time high of $274.47 by mid-January, the stock has struggled, every attempt at a rally just as quickly reversed. And its losses have only accelerated in December.
Fears surrounding Amazon’s ramping up of its Air delivery service, and a ratings downgrade from Bank of American Merrill Lynch following the abrupt departure of Express unit CEO David Cunningham, has caused the firm it to plummet. FedEx Corp (NYSE:FDX) now sits at a current trading price, and 19 month low, of $189.65.
Even before December’s slide the company wasn’t looking too clever, in part thanks to September’s Q1 update. The main issue was its earnings: adjusted diluted EPS for the quarter was expected to come in at $3.80, substantially higher than the $3.46 FedEx actually produced.
There were a few reasons for the miss, including annual pay increases that were brought forwards following Trump’s US Tax Cuts and Jobs Act, and problems at TNT, the European operation it bought back in 2016. The company did, however, hike its full year guidance by 20 cents, with FedEx now forecasting earnings of $17.20 to $17.80 per diluted share for its fiscal 2019.
In terms of Tuesday’s Q2 statement, investors will want any word on the impact of the US-China trade war given that CEO Fred Smith called the tensions ‘worrisome’ in September. A sign that it is on track to deliver at the top end of that revised earnings guidance is also necessary. At this point analysts are expecting a 8.9% rise in revenue to $17.8 billion, alongside a near 26% surge in earnings to $4 per share.
FedEx Corp has a consensus rating of ‘Buy’ alongside an average target price of $286.05.
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