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Will Q1 Earnings be a Dampener for FedEx (FDX) Stock?

Zacks

Memphis, TN-based FedEx Corporation FDX is scheduled to report first-quarter fiscal 2017 earnings results on Sep 20, after the market closes.

In fourth-quarter fiscal 2016, FedEx had reported better-than-expected earnings. However, things do not look so rosy this time around as the bottom line is expected to be hurt by higher costs.

Our proven model does not conclusively show that the company is likely to beat estimates in the fiscal first quarter. This is because it lacks the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – which is necessary for an earnings beat.

Zacks ESP: Earnings ESP for FedEx is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.79 per share.


Zacks Rank: FedEx has a Zacks Rank #4 (Sell). We caution against Sell-rated stocks going into an earnings announcement.

FEDEX CORP Price and EPS Surprise

FEDEX CORP Price and EPS Surprise | FEDEX CORP Quote

Factors at Play

FedEx has delivered positive earnings surprises in three of the last four quarters, with an average beat of 2.73%. We note that FedEx’s fiscal 2017 outlook, provided on the fourth quarter conference call, did not include the impact of the TNT Express acquisition, completed in May this year. We expect an update on its integration process during the first-quarter fiscal 2017 conference call.

Though the buyout is expected to prove favorable in the long run, costs related to the acquisition are likely to hurt the company’s fiscal first-quarter results. Focus will also be on the performance of the company’s freight division. Operating results of this division were hurt by higher salaries and costs pertaining to employee benefits in the last reported quarter. Continuous below-par performance of the segment may negatively impact the stock.

A detailed commentary on the impact of Brexit on the company is also expected at the conference call. Moreover, with rival United Parcel Service, Inc. UPS recently announcing its decision to hike its service rates, FedEx is expected to follow suit on Sep 20.

Nonetheless, we are pleased with FedEx’s announcement of a hike in quarterly dividend payout in June this year. An update on dividends/buybacks is also expected during the fiscal first-quarter conference call. With so much to look forward to, we expect investor focus to remain on this key transportation player’s results.

Stocks That Warrant a Look

Here are a few transportation stocks that you may want to consider, as our model shows that these have the right combination for an earnings beat in their next earnings release:

Copa Holdings SA CPA has a Zacks Rank #1 and an Earnings ESP of +5.26%.

Green Plain Partners LP GPP has an Earnings ESP of +2.33% and sports a Zacks Rank # 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

See our video article on FedEx’s expected Q1 earnings here


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