) gapped lower on Tuesday morning after the company released its
fiscal first-quarter earnings and provided updated guidance below
Street estimates. At last check, FDX was down around two percent to
$87.50. The stock has been underperforming the market in 2012,
notching a gain of just under five percent.
The stock continues to trade well below pre-financial crisis
levels and has been unable to break above the mid-$90 level in
recent years despite testing that area multiple times. The company
issued a profit warning two weeks ago, citing economic softness,
which was impacting growth in its FedEx Express unit.
FedEx reported net income of $459 million or $1.45 per share,
compared to $464 million or $1.46 per share in the year ago period.
This came in ahead of Wall Street analysts' consensus EPS estimates
of $1.40 for the first-quarter.
Total revenues at the company were up three percent to $10.79
billion versus $10.52 billion last year. This came in slightly
ahead of consensus revenue expectations of $10.70 billion.
The company announced that it will be raising rates on FedEx
Express shipping by 3.9 percent for U.S. domestic, U.S. export, and
U.S. import services beginning on January 7, 2013. FedEx Freight
increased rates by 6.9 percent on July 9, 2012. The rate increase
is designed to offset slowing revenue growth within the FedEx
Express unit on account of sluggish economic conditions in the
"As we announced on September 4, weakness in the global economy
constrained revenue growth at FedEx Express during our first
quarter and affected our earnings," Chairman, President and CEO
Frederick Smith said in a statement.
For the first-quarter, FedEx reported that its operating margins
had slipped from seven percent to 6.9 percent.
Looking ahead to the second-quarter, the company said that it
expects earnings per share between $1.30 and $1.45. This is well
below analyst's consensus of $1.60.
For fiscal 2013, the company lowered its earnings guidance to a
range of $6.20 to $6.60 per share from $6.90 to $7.40. Currently,
analysts are projecting that FedEx will report EPS of $7.04 for
fiscal 2013. The company's new guidance range is well below current
The losses in the stock have been contained on Tuesday as the
company's earlier profit warning braced the Street for Tuesday's
disappointing results. From a technical perspective, there is
little to suggest that the stock is setting up to move higher in
the near-term, and the company's disappointing forward outlook
could weigh on the shares going forward.
The announcement of a another round of quantitative easing by
the Federal Reserve last week could also put upward pressure on
FedEx's energy costs. From a valuation perspective, however, FDX
does not look expensive. The stock currently trades at a trailing
P/E of 13.65, a forward P/E of 10.60, and a PEG ratio of just 0.94.
Analysts are projecting that FedEx will report a 6.10 percent
increase in sales for 2013.
The shares are also currently yielding around 0.60 percent and
the blue-chip Dow component has a history of raising its
The implications of FedEx's weak second-quarter guidance,
slashed 2013 view, and downbeat commentary should be noted by
investors. The results from FedEx highlight the continued headwinds
faced by cyclical companies which are dependent on economic growth
both domestically and internationally. The stock is seen as a major
bellwether for the health of the economy, and the company's outlook
suggests that conditions remain difficult.
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
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