Breaking News
0

Will High Operating Expenses Mar FedEx's (FDX) Q4 Earnings?

By Zacks Investment ResearchJun 18, 2019 10:18PM ET
www.investing.com/analysis/will-high-operating-expenses-mar-fedexs-fdx-q4-earnings-200432884
Will High Operating Expenses Mar FedEx's (FDX) Q4 Earnings?
By Zacks Investment Research   |  Jun 18, 2019 10:18PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

FedEx Corporation (NYSE:FDX) is set to release fourth-quarter and fiscal 2019 results after the closing bell on Jun 25.

In third-quarter fiscal 2019, the company witnessed a negative earnings surprise of 2.3%. Earnings (excluding 22 cents from non-recurring items) came in at $3.03 per share, which lagged the Zacks Consensus Estimate of $3.10.

In fact, this Memphis, TN-based company has reported bottom-line miss in three successive quarters. Factors like high operating expenses and the intensifying trade spat between the United States and China have been hurting the company’s quarterly performance.

We fear that FedEx may falter in the soon-to-be-reported quarter as well. This is because the challenges confronting the company might persist in fourth-quarter fiscal 2019. Additionally, FedEx’s disappointing price performance over the past three months (down 5%) reflects its struggles.

Moreover, the fact that the Zacks Consensus Estimate for fourth-quarter fiscal 2019 earnings has been revised 9.3% downward over the past 90 days. This further highlights the negative sentiment surrounding the stock ahead of the earnings release.

Our quantitative model too does not conclusively show that FedEx is likely to beat on earnings in fourth-quarter fiscal 2019. Here's why:

FedEx does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — for increasing the odds of an earnings surprise. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: FedEx has an Earnings ESP of -2.62%. This is because the Most Accurate Estimate is pegged at $4.73 per share, lower than the Zacks Consensus Estimate of $4.86.

Zacks Rank: FedEx’s Zacks Rank #4 is a further dampener and makes an earnings beat even less likely.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Likely at Play

We expect high costs to hurt FedEx's bottom line in the fourth quarter of fiscal 2019. With the package delivery company investing significantly to upgrade facilities at its key divisions, capital expenses are on an upswing. Additionally, integration expenses pertaining to TNT Express are pushing up costs.

We also remain concerned about the escalating trade war tensions between China and the United States as FedEx has Chinese exposure. In January 2018, FedEx had opened a hub in Shanghai to strengthen its presence in China.

The company’s major revenue generating segment, FedEx Express, is expected to dish out a below-par performance in the fourth quarter as was the case in the last reported quarter. Also, segmental revenues are anticipated to be hurt by soft international revenues due to weak macroeconomic conditions and sluggish global trade. Notably, the Zacks Consensus Estimate for operating income at the FedEx Express division stands at $848 million, lower than $990 million reported a year ago.

FedEx’s high-debt levels further add to its woes. These apart, we believe that Amazon.com’s (NASDAQ:AMZN) expansion into the logistics network offering discounted and faster deliveries is a potential threat to FedEx. We expect a commentary on the issue on the fourth-quarter conference call.

FedEx is also expected to shed light on its row with Chinese telecoms equipment maker Huawei, which took place this May. Huawei had accused FedEx of diverting two parcels destined for addresses in Huawei to the United States and attempting to reroute two others. Currently, the Chinese company is reviewing its relationship with FedEx after the incident. Even though FedEx has apologised for the mishap, we believe the final decision on the matter is pending.

However, solid growth of e-commerce is anticipated to boost FedEx’s top line in the quarter to be reported.

Stocks to Consider

Investors interested in the broader Transportation sector may consider the following stocks with the right combination of elements to deliver an earnings beat in the upcoming releases:

Delta Air Lines (NYSE:DAL) has an Earnings ESP of +0.63% and a Zacks Rank #3.

Canadian Pacific Railway Limited (NYSE:CP) has an Earnings ESP of +3.30% and a Zacks Rank of 3.

This Could Be the Fastest Way to Grow Wealth in 2019

Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.

These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.

Click here to see these breakthrough stocks now >>



Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

Canadian Pacific Railway Limited (CP): Free Stock Analysis Report

Amazon.com, Inc. (AMZN): Free Stock Analysis Report

FedEx Corporation (FDX): Free Stock Analysis Report

Original post

Zacks Investment Research
Will High Operating Expenses Mar FedEx's (FDX) Q4 Earnings?
 
Will High Operating Expenses Mar FedEx's (FDX) Q4 Earnings?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email