- Wednesday, October 16, 2024
FedEx is set to release its fiscal second-quarter earnings after the market closes on Tuesday, with a particular focus on cost control.
Investors are looking for signs of improving profitability, no matter the state of the economy.
According to a FactSet survey, Wall Street analysts expect FedEx to report earnings per share of $4.19 on sales of $22.4 billion for the quarter ended Nov. 30. This is compared to earnings per share of $3.18 on sales of $22.8 billion for the same period last year.
The fact that earnings are projected to increase despite lower sales demonstrates the improved profitability that investors are hoping to see. Operating-profit margins for the quarter are expected to be around 6.6%, up from about 5.3% in the year-ago quarter.
In addition to earnings, FedEx will provide updates on the state of the fiscal year. In September, management projected earnings per share of $17 to $18.50, with a midpoint of approximately $17.75, for the fiscal year ending May 2024. In June, they had estimated a profit per share range of $16.50 to $18.50, with a midpoint of $17.50. The profit for fiscal 2023 was nearly $15 per share.
Stay tuned for the latest insights on FedEx's cost control and profitability in their upcoming earnings report.
FedEx's Transformation: A Strong Investment Case
According to Bernstein analyst David Vernon, investors should look beyond beat-and-raise quarters when considering FedEx as a stock. In his recent report previewing earnings, Vernon emphasizes that the investment case for FedEx lies in its multiyear transformation through initiatives called DRIVE and Network 2.0.
Both DRIVE and Network 2.0 aim to simplify the operations of FedEx. Starting in June, the company plans to collapse the overhead structure for its Ground and Express divisions. This streamlining process is expected to generate an earnings lift, which, in turn, will instill market confidence and potentially lead to higher earnings growth. As of now, FedEx stock trades at approximately 14 times calendar 2024 earnings, while its competitor United Parcel Service trades at around 17 times earnings, and the S&P 500 trades at roughly 19 times earnings.
Bernstein's Vernon rates FedEx stock as a Buy with a price target of $340. Currently valued at about $282, FedEx stock has shown a significant increase of approximately 13% over the past three months, outperforming the S&P 500 (6%) and Dow Jones Industrial Average (8%).
Over the latest 12-month period, FedEx stock has gained an impressive 67%.
FedEx management will be hosting a conference call at 5:30 p.m. Eastern time to discuss these results.
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