After a turbulent 2018, shares of FedEx (FDX) have kept pace with the market this year, but bulls aren’t feeling confident about what the company might reveal when it reports third quarter fiscal 2019 earnings results after the closing bell Tuesday.
The package delivery giant, as have its peers like UPS (UPS), have fallen victim to Amazon (AMZN), which recently launched Prime Air and seeks to disrupt the shipping industry. FedEx stock has been under heavy selling pressure, plunging almost 30% over the past twelve months. This is part of the reason, aside from the aforementioned threat from Amazon, the company’s earnings projections have been on the decline.
But several analysts such as Stephens’ Jack Atkins believe FedEx can overcome the threat and is calling for investors to be patient. Atkins has an Overweight rating on the stock with a $240 price target, calling for some 35% premiums from current levels of around $179. Although Atkins describes the upcoming report to be “another noisy quarterly result” and warns the company could miss consensus EPS estimates, FedEx has beaten estimates strongly in the previous two quarters.
Nonetheless, on Tuesday it’s going to take more than just an earnings beat to turn sentiment around. Investors will want to see not only continued strength in the company’s extensive delivery network, but also FedEx’s rising e-commerce business. Investors will also listen for commentary on the company, which has experienced recent management turnover, plans to integrate its TNT Express acquisition.
In the three months that ended February, analysts expect the Memphis, Tenn.-based company to earn $3.17 per share on revenue of $17.69 billion. This compares to the year-ago quarter when earnings came to $3.72 per share on revenue of $16.53 billion. For the full year, ending June, earnings are projected to rise 4% year over year to $15.99 per share, up from $15.31 a year ago, while revenue of $70.91 billion would rise 8.3% year over year.
Without question, FedEx has a lot to prove to investors on Tuesday. Beyond beating estimates, investors will want assurances from the management that not only are FedEx’s many operating initiatives on schedule, the company has considerable staying power, even if Amazon were to enter its space. And while expectations have been lowered, the company can’t afford to miss on the bottom line, which would fuel the negative sentiment on the stock.
On the bright side, the company’s ongoing cost management initiatives, including any announcement surrounding reduced fiscal 2020 Capex spending, should continue to drive long-term profitability, suggesting now is a solid buying opportunity, given that the company has beaten profit estimates in the previous three quarters.
As such, investors who are looking for a strong bounce-back stock in 2019 might want to nibble a bit here in advance of Tuesday’s earnings, especially with shares still down some 33% from their 52-week high of $266.