Why FedEx Earnings Are in the Express Lane for Underperforming

When FedEx Corp. (NYSE: FDX) released its most recent quarterly results after the markets closed on Tuesday, the firm said that it had $3.03 in earnings per share (EPS) and $17.01 billion in revenue. That compared with consensus estimates of $3.11 in EPS and $17.67 billion in revenue, as well as the $3.72 per share and $16.53 billion posted in the same period of last year.

Overall, operating income improved due to lower variable incentive compensation expenses, U.S. volume growth, a favorable net impact of fuel at all transportation segments and increased yields at FedEx Freight and FedEx Ground.

Also, FedEx Express international revenue declined as a result of lower yields and unfavorable exchange rates. FedEx Express international and U.S. yields were down due primarily to higher growth in lower-yielding services and lower weight per shipment.

Looking ahead to the fiscal full year, the firm expects to see EPS in the range of $15.10 to $15.90. Consensus estimates call for $15.97 in EPS and $70.88 billion in revenue for the year.

Frederick W. Smith, FedEx board chair and chief executive, commented:

Our third quarter financial results were below our expectations and we are focused on initiatives to improve our performance. Our investments in innovation, network infrastructure and automation will increase our competitiveness and drive long-term earnings growth. FedEx built and operates the preeminent global parcel and logistics network, and we have a lengthy track record of success.

Shares of FedEx closed Tuesday at $181.41, in a 52-week range of $150.94 to $266.67. The consensus price target is $221.40. Following the announcement, the stock was down about 6% at $170.20 in early trading indications Wednesday.