Fed Ex Earnings Preview: Fiscal Fourth Quarter 2009

Fed Ex [[FDX]] is expected to report their fiscal fourth quarter 2009 results before the market opens on Wednesday, June 17. Based on our analysis, we at EarningsPreviews.com are expecting FDX to report disappointing results that fail to meet Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $8.42 billion and EPS of $.49. This would represent a 15% decline in revenues from last year’s $9.87 billion in the same period. The current analyst consensus estimates calls for revenues of $8.37 billion and EPS of $.53. On March 19, the company provided fiscal fourth quarter EPS guidance of $.45 – $.70.

 

Last quarter, Fed Ex’s results badly underperformed Wall Street’s expectations as the global recession weighed on their results. While there have been signs of improving consumer sentiment over the last few months, global economic conditions remain very poor. This weak economic environment has had the double whammy effect of decreasing both freight volume as well as putting pressure on pricing as customers look to cut costs across the board.

 

The rising cost of oil could further weigh on Fed Ex’s earnings performance for the remainder of 2009. While we expect that volumes will remain depressed into 2010, the escalating cost of oil could offset some of the cost cutting measures the company has already undertaken.  

 

Share Performance

Since the beginning of the year, Fed Ex’s shares have fallen over 11%. In 2008, FDX’s shares fell 28% as the stock slightly out-performed the 34% decline in the Dow Jones industrial average.

 

Valuation

Shares are now trading at 17x consensus 2010 EPS estimates. This is slightly above the relative valuations of their peer group. The weak global economy and escalating oil prices are likely to weigh on Fed Ex’s performance for the remainder of 2009.

 

Recommendation: Sell with a $49 price target.

 

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