FedEx Corporation
(
FDX
), a leading parcel delivery company, is slated to release its
fourth quarter and fiscal 2012 results on Tuesday, June 19. The
current Zacks Consensus Estimate for fourth quarter earnings is
pegged at $1.92 per share.
Third-Quarter Flashback
FedEx' third quarter adjusted earnings of $1.55 per share
outpaced the Zacks Consensus Estimate of $1.36 and the year-ago
earnings of 81 cents. The outperformance was attributable to strong
yields, record holiday shipping and a remarkable performance by
FedEx Ground.
Total revenue for the third quarter increased 9% year over year
to $10.56 billion but missed the Zacks Consensus Estimate of $10.63
billion.
Agreement of Estimate Revisions
Estimates revisions for the fourth quarter and fiscal 2012 and
2013 have been skewed to the negative side over the last 7 and 30
days.
For the fourth quarter, out of 19 estimates none moved upward in
last seven or 30 days. Further, no downward change has been seen in
last 7 days. However, 2 estimates moved downward in last 30
days.
For fiscal 2012, out of 19 estimates, 1 each showed upward
movement in last 7 and 30 days. One downside revision was made in
the last 7 days and 3 estimates moved downward in the last 30
days.
For fiscal 2013, out of 21 estimates, no upward movement was
registered in the last 7 and 30 days. However, 2 and 5 of the
estimates were reviewed downwards in last 7 days and 30 days,
respectively.
We believe that with the global economic meltdown alongside the
debt crisis surrounding the eurozone, analysts remain conservative
over the company's earnings expectation. Despite strong growth
prospects, margin performance of the Express segment is expected to
remain subdued due to demand shift to the lower-margin-generating
Ground business.
Furthermore, the European economies remain volatile, which are
expected to result in less business for FedEx. Asian demand is also
likely to stay suppressed. Fuel cost worries also contribute to a
cautious stance on the company.
Magnitude of Estimate Revisions
For the fourth quarter, the magnitude of estimate revisions
remained unchanged over the last 7 days at $1.92. However, it
dropped by a penny over the last 30 days.
For fiscal 2012, the Zacks Consensus Estimate remained unchanged
at $6.50 over the last seven days but dropped by a penny from $6.51
over the last 30 days.
For fiscal 2013, the Zacks Consensus Estimate is pegged at
$7.43, 2 cents and 3 cents down from the last 7 and 30 days,
respectively.
Earnings Surprises
With respect to earnings surprise, over the trailing four
quarters, FedEx outperformed the Zacks Consensus Estimate on three
occasions, averaging 4.58% overall.
The current Zacks Consensus Estimate for the to-be reported
quarter contains a downside risk of 2.08%. For fiscal 2012, the
Zacks Consensus has an upside potential of 0.31%. For fiscal 2013,
the Zacks Consensus Estimate is skewed downside with a 1.08% risk
factor.
Our Recommendation
Despite moderate economic growth, we believe FedEx is poised to
benefit from improved pricing, volume growth, continued yield
improvement and diminishing cost headwinds. These would lead to
improved revenue, margins, earnings and cash flow over the
long-term. However, increased investments, competitive threats from
industry giants like
United Parcel Service
(
UPS
), unionized workforce and steeper fuel prices could limit the
upside potential of the stock.
We are currently reiterating our long-term Neutral rating on
FedEx. The stock retains a Zacks #3 Rank (Hold) for the short
term.
FEDEX CORP (FDX): Free Stock Analysis Report
UTD PARCEL SRVC (UPS): Free Stock Analysis
Report
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