About a month has gone by since the last earnings report for FedEx CorporationFDX . Shares have added about 3.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers .
First Quarter Earnings
FedEx's earnings (excluding 32 cents from non-recurring items) of $2.51 per share significantly fell short of the Zacks Consensus Estimate of $3.17. Furthermore, the bottom line declined 13.5% on a year-over-year basis due to higher costs.
Quarterly revenues increased 4.3% year over year to $15,297 million, lagging the Zacks Consensus Estimate of $15,368.7 million. The top line was hurt primarily due to the TNT Express cyberattack.
Operating income (on an adjusted basis) decreased 6.8% year over year to $1.24 billion in the quarter primarily due to the cyberattack. Also, operating margin contracted to 8.1% during the quarter from 9.1% in first-quarter fiscal 2017.
Quarterly revenues at FedEx Express (including TNT Express) improved 2.2% to $8.65 billion, driven by hiked base rates and higher package volume. Operating income came in at $521 million, down 20.1% year over year, while operating margin reduced to 6% year over year. Operating results were hampered by the cyberattack.
FedEx Ground revenues gained 8% year over year to $4.64 billion in the fiscal first quarter. In fact, volume expansion and higher base rates aided the segmental performance during the reviewed quarter. Average daily volume rose 4% in the fiscal first quarter. Operating income came in at $626 million, up 3%. Operating margin declined 70 basis points (bps) to 13.5%.
FedEx Freight revenues rose 6% year over year to $1.75 billion. Segmental revenues were benefited by increased base rates and fuel surcharges. Also, the segment's operating income surged 30% to $176 million. Plus, operating margin expanded 190 bps to 10%.
Bleak Fiscal 2018 View
The company has lowered guidance for fiscal 2018 due to concerning effect fromTNT Express cyberattack. It now expects earnings in the band of $11.05-$11.85 per share, excluding year-end MTM pension accounting adjustments.Previous outlook had called for a rise in the metric of $13.20-$14 per share. Notably, the guidance assumes moderate economic growth and recovery from the cyberattack. Capital expenses are still projected at $5.9 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been seven revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 7.5% due to these changes.
FedEx Corporation Price and Consensus
At this time, FedEx's stock has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We expect below average returns from the stock in the next few months.