FedEx is ‘setting the bar pretty low’: Expert

By:
on Dec 21, 2022
Listen
  • 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.

Follow Invezz on Telegram, Twitter, and Google News for instant updates >

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.  

Are you looking for signals & alerts from pro-traders? Sign-up to Invezz Signals™ for FREE. Takes 2 mins.

Analyst reacts to FedEx future guidance

Copy link to section

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

Copy link to section
  • 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.

Ad

Want easy-to-follow crypto, forex & stock trading signals? Make trading simple by copying our team of pro-traders. Consistent results. Sign-up today at Invezz Signals.

Learn more
USA North America Services Stock Market Transport & tourism World