FedEx ( FDX ) is looking strong heading into fourth-quarter earnings, expected out Wednesday, June 22nd before the market opens.
Though FedEx only eked out a win after cutting its outlook prior to third-quarter earnings, the victory was notable amid tough weather conditions. This quarter should be easier for the shipper: the Street is looking for EPS of $1.72 on revenue of $10.42 billion. If the company can hit these expectations, sequential growth would be a sharp 112 percent and a 29 percent gain from $1.33 in the same period last year.
FedEx shares traded about flat through the quarter, beginning at $90.57 in March and finishing 3.2 percent better to $93.50 at the end of May.
Valuation on FedEx is 13.7x next years earnings, compared with 14.1x for UPS.
Analysts are overly bullish on the potential for FedEx; data from Bloomberg has 22 with a Buy, 7 with a Hold, and just one suggesting to Sell. The analyst price target average is $112.40, with a low of $90 and high of $133. FedEx has traded in a range of $69.78 to $98.52 over the last 52-weeks.
- Deutsche Bank is positive on FedEx into the report. The firm is looking for a relatively in-line report stemming from "stable volumes and solid pricing trends as well as improved profitability at FedEx Freight."
Commenting on rising fuel costs: "While the price of diesel and jet fuel were up on average 33% y/y and 48% y/y in FQ4, respectively, we expect the headwind from higher fuel prices to moderate this quarter due in part to better fuel surcharge recovery (13.2% and 7.5% average Express and Ground fuel surcharges in FQ4 2011 vs. last year of 7.7% and 5.3%, respectively). We believe higher fuel surcharge recovery and improved yields across FDX's businesses should offset the fuel cost headwind. Moreover, FDX is poised to benefit from improved profitability at Freight (its LTL segment) due to materially better industry pricing as well as its restructuring."
Deutsche has a Buy rating on the stock, and Street high price target of $133.
- Goldman is also bullish on FedEx into earnings on improved domestic pricing, lower maintenance expense, profitability in China, and LTL margin expansion. Mostly though, Goldman is betting on an improved FY12 outlook, with a worst case scenario EPS range of $6.75 to $7.10 based on 37 - 44 percent growth (the lowest estimate from the Company from 2004 and 2007).
"We expect FedEx to acknowledge recent slower global growth and provide a cautiously optimistic economic outlook that is similar to recent comments by UPS. Typically international priority volumes and domestic pricing are the key read through from FedEx earnings. In F4Q11, our model assumes 5.1% growth in IP average daily package volume and a 2.5% increase in domestic express base rates. Given tougher comparisons, we believe base rates above 3.0%-3.5% for FedEx's domestic Express business would be a positive indicator for UPS."
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.