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FedEx Corp reported better than expected earnings after the close Tuesday with largely negative expectations as the trade war has hurt $FDX more than most with it's large China presence. Lower FedEx International Priority package and freight revenues at FedEx Express hurt.

fedex holiday

The trade war has hurt $FDX more than most with it's large China presence. Europe's doldrums haven't helped its TNT Express business either and the stock is down a third over the past year. Rivals include $AMZN, $UPS and DHL

FedEx had been a star of the the bull market - and then came the Trade War.

FedEx Corporation NYSE: FDX Reported Earnings After Close Tuesday

$5.01 Beat $4.85 EPS With $17.80 billion as expected forecast in revenue

Earnings

FedEx reported it's fiscal Q4 earnings Tuesday of EPS $5.01 (adj.) on revenue of $17.8 billion. Analysts broadly expect FedEx to report a near 3% uptick in sales to $17.80 billion; but profits are modeled to dip around 17% to $4.85 per share

The average analyst EPS estimate for the quarter ended May, as compiled by FactSet, is $4.85, which is down from $5.91 in the same period a year ago. The FactSet consensus has declined steadily this year, from $4.93 at the end of March and $5.32 at the end of December.

Net loss was $1.97 billion or $7.56 per share compared to a profit of $1.13 billion or $4.15 per share in the previous year quarter. Adjusted earnings decreased by 15% to $5.01 per share.

The FactSet revenue consensus was $17.80 billion, up from $17.30 billion a year ago. That includes a $9.46 billion consensus for FedEx Express, a $5.20 billion consensus for FedEx Ground and a $2.01 billion estimate for FedEx Freight. Estimize is projecting revenue of $17.84 billion. For 2020, the FactSet consensus is for revenue of $72.12 billion.

Analysts Ahead of Earnings

Earnings and revenue estimates have been cut on concerns over a slowdown in the global economy, particularly in China and Europe. Analyst Patrick Brown at Raymond James said the non dividend raise “could prove a telling sign,” given mounting macro uncertainty, sluggish volume trends and FedEx’s need to refresh its aircraft fleet and make ongoing e-commerce investments. Brown kept his rating at outperform, but lowered his stock price target to $200 from $215, cut his adjusted earnings-per-share estimate for fiscal 2020 to $15.50 from $17.10 and lowered his revenue forecast to $70.76 billion from $72.77 billion.

Not all analysts are bearish, Bernstein’s David Vernon, raised his price target from $196 to $205 on June 20 and reiterated his “Outperform” rating on shares saying that a bad-case scenario is already priced into FDX.

FedEx has indicated changes in U.S. policy have resulted in several governments, including China, the European Union and India, imposing retaliatory tariffs, and we have seen demand, global trade and economic activity all fall sharply hurting FDX with much lower shipping volumes.

FedEx Corporation NYSE: FDX

Market Reaction After hours $159.00 +$3.02 (+1.94%)

Highlights

Our fiscal 2020 performance is being negatively affected by continued weakness in global trade and industrial production, especially at FedEx Express,” said Alan B. Graf, Jr., $FDX executive vice president and chief financial officer.

  • Revenue from FedEx Express declined by 1% year-over-year, total FedEx Express package revenue rose by 1% as increases in the US package revenue offset declines in the international export package and international domestic revenues.
  • Revenue from FedEx Ground grew by 11%, FedEx Ground average daily package volume increased by 9% and revenue per package or yield rose by 2%
  • Revenue from the Freight segment increased by 5%
  • Revenue from FedEx Services segment rose by 1%.
  • Freight revenue declined by 7% due to decreases in the US, international priority, economy, and airfreight. Average daily shipment rose by 1%, revenue per shipment increased by 4%, and composite weight per shipment increased by 4%

FedEx Q4 2019 Earnings

Outlook

During fiscal 2020, operating income at FedEx Ground and FedEx Freight is expected to increase due to higher revenues. At FedEx Express, macroeconomic weakness, and trade uncertainty continued mix shift to lower-yielding services and a strategic decision to not renew a customer contract will negatively impact operating income.

For fiscal 2020, the company expects a low-single-digit percentage point increase in EPS prior to the year-end MTM retirement plan accounting adjustment compared with fiscal 2019 earnings of $13.25 per share.

FedEx sees a mid-single-digit percentage point decline in EPS prior to the year-end MTM retirement plan accounting adjustment and excluding estimated TNT Express integration expenses compared with last year’s adjusted EPS of $15.52.

Capital spending is expected to be $5.9 billion. Total TNT Express integration program expenses through fiscal 2021 are now estimated to be approximately $1.7 billion, of which $350 million is expected to be incurred in fiscal 2020.

The company said its fiscal 2020 performance is being negatively affected by continued weakness in global trade and industrial production, especially at FedEx Express.

For fiscal 2020, the FactSet EPS consensus was $16.23. That’s down from $16.82 at the end of March and $17.99 at the end of 2018.

What to Watch For

  • Key will be 2020 earnings guidance and management comments on the “much anticipated” post-earnings conference call, with questions on Amazon, China and dividends to feature.
  • FedEx’s decision announced on June 7 to end its Express unit’s domestic contract with Amazon.com Inc. AMZN. While this could help improve margins, as it allows the company to add higher-margin business-to-business customers, the need to do so worrys some.
  • FedEx’s declared on June 10 a quarterly dividend that was unchanged from a year ago, which snapped a 10-year streak of rising dividends.
  • FedEx has indicated changes in U.S. policy have resulted in several governments, including China, the European Union and India, imposing retaliatory tariffs, and we have seen demand, global trade and economic activity all fall sharply hurting FDX with much lower shipping volumes.

World's largest shipper A.P. Moeller-Maersk A/S Warns on Trade Shrinkage Last Month

Maersk Global East West Imports 2019 Q1

 

Maersk Global Exports 2019 Q1

 

Sources: FedEx, AlphaStreet

From The TradersCommunity Research Desk

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