FedEx (FDX) is set to report fourth quarter fiscal 2018 earnings results after the closing bell Tuesday.
Thanks to a strong global economy, lead by robust consumer spending, the worldwide delivery giant has strung together some impressive earnings beats each of the last two quarters. And Wall Street expects FedEx — which has delivered almost 20% annual earnings growth over the last five years — expects this level of performance to continue. As such, investors who are looking for a solid long-term play on consumer spending, sustained U.S. and global economic recovery, will pay close attention on what FedEx management has to say.
For the three months that ended May, analysts expect the Memphis, Tenn.-based company to report EPS of $5.68 per share on revenue of $17.24 billion. This compares to the year-ago quarter when earnings came to $4.25 per share on revenue of $15.73 billion. For the full year, earnings are projected to be $15.05 per share, up from $12.30 a year ago, while revenue of $65.36 billion would rise 8.3% year over year.
Indeed, the strong economy has worked in FedEx's favor. But investors continue to worry about the potential impact that Amazon's (AMZN) shipping and logistics ambitions could have on FedEx’s growth. These fears have caused FedEx shares to see-saw for most of 2018. The shares fell to a recent low of $228 in March, but they’ve come roaring back as much as 17% and now sit within an eyelash of a new 52-week high.
Cooler head have seemingly realized FedEx’s size and scale is too much of an asset for Amazon to disrupt overnight. On Tuesday management must affirm this belief. Working in its favor, the company enjoys a wide solutions portfolio when it comes to package delivery in the United States.
The fact that some 95% of its annual revenue comes customers that have two or more operating segments speaks to not only FedEx’s moat, but also the company’s ability to cross-sell to boost revenues in FedEx Express, FedEx Ground, and FedEx Freight — all of which raised shipping rates about 5% 4.9% in 2018.
Beyond revenue, FedEx’s profits are likely to expand, too. Wall Street expects the company’s fourth quarter operating margin to expand 30 basis points to 11.5%, compared to 11.2% a year ago. And in for the next fiscal year, analysts expect FedEx’s operating margin to climb more than one percentage point to 9.8%. And this is because the company continues to be a key beneficiary of U.S. e-commerce growth as well as the growth being witnessed around the globe.
All told, when looking at the combination of high consumer confidence, low unemployment and rising wages, FedEx’s services should remain in high demand, particularly as consumers and businesses transact more shopping online. Meanwhile, from a valuation perspective, FedEx stock — trading at just 15 times forward estimates — suggests the stock can still deliver long-terms gains for years to come.