Yahoo Finance FedEx (FDX) Up 20.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for FedEx (FDX). Shares have added about 20.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FedEx due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
FedEx Misses on Earnings in Q3
The company’s third-quarter fiscal 2020 adjusted earnings (excluding 21 cents from non-recurring items) of $1.41 per share fell short of the Zacks Consensus Estimate by 8 cents. Moreover, the bottom line plunged 53.5% year over year. Results were hurt by factors like the coronavirus pandemic, weak macroeconomic conditions, higher costs at the Ground unit due to expanded service offerings, loss of business with Amazon, shift to lower-yielding services and a highly competitive pricing scenario.
Quarterly revenues inched up 2.8% year over year to $17,487 million and also surpassed the Zacks Consensus Estimate of $17,068.7 million despite coronavirus-related woes. Operating income (on an adjusted basis) plunged 50.9% year over year to $483 million in the reported quarter due to sluggish global economy and elevated costs. Operating margin (adjusted) also deteriorated to 2.8% from 5.8% in the year-ago period.
Segmental Performance
Quarterly revenues at FedEx Express (including TNT Express) dipped 1% to $8,924 million due to 5% decline in freight revenues as a result of the slowdown in global economy and certain other factors. Segmental operating income (adjusted) decreased to $199 million from $445 million a year ago. Also, segmental operating margin contracted to 2.2% from 4.9% in third-quarter fiscal 2019, on an adjusted basis.
FedEx Ground revenues rose 11% year over year to $5,845 million in the period under consideration owing to residential delivery volume growth. Operating income came in at $355 million, slumping 39% year over year due to 17% increase in segmental operating expenses. Segmental operating margin shrank to 6.1% from 11.1% in the prior-year quarter.
FedEx Freight revenues slipped 1% year over year to $1,738 million due to softness in volume growth. The segment’s operating income increased 16% to $113 million, driven by lower operating expenses. Moreover, operating margin expanded to 6.5% from 5.5% in the year-ago quarter.
Moreover, the company suspended its earnings outlook for fiscal 2020 due to the coronavirus-led uncertainty.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -23.98% due to these changes.
VGM Scores
At this time, FedEx has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise FedEx has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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