FedEx Earnings Preview: Fiscal First Quarter 2010

Fed Ex [[FDX]] is scheduled to report their fiscal first quarter 2010 results before the market opens on Thursday, September 17th. Based on our analysis, we at are expecting FDX to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $8.22 billion and EPS of $.45. This would represent an 18% decrease in revenues from last year’s $9.97 billion in the same period. The current analyst consensus estimates calls for revenues of $8.12 billion and EPS of $.43. On June 17, the company provided fiscal first quarter guidance of $.30 – $.45 EPS.


Fed Ex delivered a strong earnings beat last quarter and commented that they were seeing signs that the worst of the recession was over. Since that point, FDX shares have been in full rally mode – increasing 40% since their last earnings announcement. Shipping volumes are likely to remain depressed this quarter while fuel costs continue to climb higher as a result of rising oil prices. However, we view management’s earnings guidance as being on the conservative side and expect reported results to be at the high end of their guidance range.


The company declined to provide full year earnings guidance given the lack of visibility regarding the economic recovery and the volatility in fuel prices. We would expect weak consumer demand over the next few quarters as price conscious customers reduce their shipping volumes and shop for lower-cost options.


Stock Performance

Since the beginning of 2009, Fed Ex’s shares have gained nearly 11% and have outperformed the 8% gain in the Dow Jones Industrial average. Last year, FDX’s stock fell 28% and outperformed the 34% drop in the Dow Jones Industrial average.



Shares are now trading at 18x consensus 2011 EPS estimates. This is a slight premium to the relative valuations of their peer group. With the stock rallying 40% over the last 3 months, we are concerned that further upside may be limited


Recommendation: Hold with a $70 price target.


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