FedEx (FDX) to Report Q3 Earnings: Will the Stock Gain?

FedEx CorporationFDX is set to report third-quarter fiscal 2017 results after the closing bell on Mar 21.

Last quarter, FedEx - a leading player in the field of global express delivery services - posted a negative surprise of 3.78%. Also, the bottom line was hurt by higher costs. However, the earnings miss in the fiscal second quarter was the only time the company had reported lower-than-expected earnings in the last four quarters. The average earnings beat over the last four quarters is 2.28%.

Price Performance

The FedEx stock has been struggling since the Q2 earnings miss, contracting 2.2% over the last three months. However, it has performed better than the Zacks categorized Transportation-Air Freight industry in the period. In fact, the industry has shrunk 6.7%, over the last three months.

The fact that the Zacks Consensus Estimate for the fiscal third quarter has gone down 2.2%, over the last three months, further exemplifies the struggles of the stock.

Despite all the pessimism, an earnings beat might not be too difficult for FedEx in the quarter due to reduced expectations. Moreover, the Zacks Consensus Estimate for the fiscal third quarter seems to be pretty conservative, 8.9% below the comparable figure of 2.91 for the fiscal second quarter.

Our quantitative model too shows that FedEx is likely to beat earnings because it has the perfect combination of two key ingredients.

Zacks ESP: The Earnings ESP for FedEx is +3.4% with the Most Accurate estimate exceeding the Zacks Consensus Estimate of $2.65 per share by 9 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: FedEx carries a Zacks Rank #3 (Hold). Note, that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Thus, the combination of FedEx's Zacks Rank #3 and a positive ESP makes us reasonably confident of an earnings beat. Further, in the event of the company reporting better-than-expected earnings its stock price is likely to get a boost. You can see the complete list of today's Zacks #1 Rank stocks here .

Note, that we caution against stocks with Zacks Ranks #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Factors Likely at Play

The earnings report is expected to reveal the picture regarding the performance of the company in the entire recent holiday season. Higher costs of package deliveries in the season should also hurt its performance.

In fact, the companies like FedEx and United Parcel Service, Inc. ( UPS ) keenly await their performances in the holiday season . Moreover, costs related to the TNT Express integration process are also likely to hurt the bottom line in the fiscal third quarter. Investors will await a detailed commentary on the progress of the integration process on the conference call. In addition, they will also look forward to FedEx's take on, Inc.'s AMZN performance in the package delivery market.

On the brighter side, the inclusion of the products of erstwhile TNT Express should aid the top line this quarter. Following the acquisition, FedEx's scale of operations, particularly in Europe, has expanded a great deal. This expansion has enabled FedEx to compete more effectively with rivals like United Parcel Service that has a substantial European presence. Furthermore, the FedEx Express division is expected to register higher revenues in the quarter, thereby boosting the top line.

FedEx Corporation Price and EPS Surprise

FedEx Corporation Price and EPS Surprise | FedEx Corporation Quote

Another Gem in the Transportation Space

Apart from FedEx, we also expect Hawaiian Holdings, Inc. HA to beat bottom-line estimates in its next earnings release. Hawaiian Holdings has an earnings ESP of +4.82 and a Zacks Rank #3.

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Hawaiian Holdings, Inc. (HA): Free Stock Analysis Report, Inc. (AMZN): Free Stock Analysis Report

United Parcel Service, Inc. (UPS): Free Stock Analysis Report

FedEx Corporation (FDX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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