FedEx is ‘setting the bar pretty low’: Expert

on Dec 21, 2022
  • FedEx Corporation reports Q2 results and issues future guidance.
  • Argus Research's Eade reacts to its update on Yahoo Finance Live.
  • FedEx says it has identified additional areas to further cut costs.

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FedEx Corporation (NYSE: FDX) is trading up after the bell even though it reported lower-than-expected revenue for its fiscal second quarter on lower volumes, teasing an economic downturn.  

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Analyst reacts to FedEx future guidance

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Still, investors are cheering earnings that topped Street estimates for the recent quarter.

For the full year, FedEx is now calling for $13 to $14 of adjusted EPS versus analysts at $14. Reacting to its guidance on Yahoo Finance Live, John Eade – the President of Argus Research said:

They’re setting the bar pretty low. There’s a good chance that FedEx does better than that. But I don’t think they want to overpromise and under deliver. They’re trying to get back in good graces of Wall Street and it’ll take a bit of time.

The parcel delivery company has also identified additional areas to cut costs. It now expects to trim costs by $3.7 billion in its fiscal 2023 – about a billion dollar more than its previous forecast.

For now, though, its operating margin (adjusted) stood at 5.3% – significantly below near 13% for UPS. But Eade noted:

That can be an opportunity for FedEx. If they’re able to take these costs out of their cost structure, you could see much sharper earnings growth going forward.

FedEx second-quarter earnings snapshot

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  • Net income printed at $788 million versus the year-ago $1.0 billion
  • Per-share earnings also contracted from $3.88 to $3.07
  • Adjusted earnings were $3.18 a share as per the earnings press release
  • Revenue sunk 3.0% year-over-year to $22.8 billion as well
  • Consensus was $2.81 of adjusted EPS on $23.7 billion in revenue

Lower demand resulted in a massive 64% hit to operating income from “Express” – it’s internationally-focused segment. It was partially offset by strength in the Ground division, though.

FedEx shares are still down 35% versus the start of 2022.


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