) is slated to release its fiscal first quarter 2013 results on
Tuesday, September 18. The current Zacks Consensus Estimate for the
fiscal first quarter earnings is pegged at $1.40 per share,
representing an annualized growth of (3.9%).
Fourth-Quarter and Fiscal 2012 Flashback
FedEx reported fiscal fourth quarter adjusted earnings of $1.99
per share outpacing the Zacks Consensus Estimate of $1.92 and the
year-ago earnings of $1.75 a share. The outperformance was
attributable to strong yields, record holiday shipping and
remarkable performance by FedEx Ground and improved FedEx Freight
For the full year, the company reported adjusted earnings per
share of $6.59, 34.5% higher than adjusted earnings of $4.90 in the
Total revenue in the quarter climbed 4% year over year to $11
billion but missed the Zacks Consensus Estimate of $11.2 billion.
For fiscal 2012, total revenue increased 8.7% year over year to
Agreement of Estimate Revisions
Estimates revisions for the first quarter and fiscal 2013
remained static over the last 7 and depict a downward movement over
the last 30 days.
For the fiscal first quarter, none of the 18 analysts made any
positive or negative estimate revision over the last 7 days. Over
the last 30 days, no upward movement was registered but all the
analysts moved downward.
Similarly, for fiscal 2013, none of the 22 analysts revised
their estimates in last 7 days but in the last 30 days, 19 analysts
made downward revisions, while no one moved upward.
For fiscal 2014, out of the 20 analysts, none made any positive
or negative revision over the last 7 days. However, over the last
30 days, 2 analysts made positive revision while 14 analysts moved
in the opposite direction.
We believe that given the global economic meltdown along with
the debt crisis surrounding the Eurozone, analysts remain
conservative over the company's earnings expectation. Based on the
same reasons, the company reduced its earnings guidance to the
range of $1.37 to $1.43 per share from the previous expectation of
$1.45 to $1.60 per diluted share in early September. The company
also apprehends subdued revenue performance in the U.S. domestic
package in fiscal 2013 due to volume declines.
Further, Express margins are expected to remain suppressed until
demand rises in the international segment and costs improve in its
domestic operations. Further, contract expiry in the U.S. Postal
Service (USPS) that includes FedEx's domestic air transportation
services for USPS' First-Class, Priority and Express Mail, which
would impact Express revenue as it contributes approximately $1
billion to annual revenues.
Magnitude of Estimate Revisions
For the first quarter of fiscal 2013, the magnitude of estimate
revisions remained unchanged over the last 7 days at $1.40.
However, it dropped 16 cents over the last 30 days from $1.56.
For fiscal 2013, the Zacks Consensus Estimate remained unchanged
at $7.02 over the last 7 days but dropped from $7.29 in the last 30
For fiscal 2014, the Zacks Consensus Estimate is pegged at
$8.25, unchanged over the last seven days but down 23 cents over
the last 30 days.
With respect to earnings surprise, FedEx outperformed the Zacks
Consensus Estimate over the last four quarters, with the average
The current Zacks Consensus Estimate for the to-be reported
quarter remains flat at 0.00%. For fiscal 2013 and 2014, the Zacks
Consensus is skewed downside with 0.43% and 0.85% risk factor.
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 in fiscal 2013. However, increased investments,
competitive threats from industry giants like
United Parcel Service
) and unionized workforce could limit the upside potential of the
We are currently reiterating our long-term Neutral
recommendation 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
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