FedEx (FDX 253.81, -1.63, -0.64%) will report first quarter (August) results this
afternoon and host a call at 5:00 p.m. ET.
Analysts expect first quarter adjusted EPS up 15% with revenue up 10%. FedEx has exceeded earnings estimates five quarters in a row and revenue estimates three quarters in a row.
Last quarter, FedEx reported record fourth quarter operating income at all three segments.
Adjusted operating income grew 15% to $2.0 bln as operating margins expanded 40 basis points to 11.5%. Fourth quarter operating results benefited from higher base rates, increased volume, and the favorable net impact of fuel at each transportation segment. Accelerated wage increases for certain hourly employees partially offset those benefits.
Fourth quarter Express Segment revenue increased 9% due to higher yields across the global portfolio of package and freight services, as well as higher freight pounds. Ground segment revenue grew 12%, driven by average daily package volume growth of 6% and higher base rates. Freight revenue grew 16% due to revenue per shipment growth of 8% and average daily shipment growth of 8%.
The company has guided for fiscal 2019 adjusted EPS (before year-end mark to market retirement plan accounting adjustments and excluding TNT Express integration expenses) of $17.00-17.60, an adjusted operating margin of 8.5% and revenue growth of 9%.
"Our fiscal 2019 results will benefit from our continued focus on revenue quality as well as from synergy realization as we make progress in combining TNT Express with FedEx Express," said Alan Graf, Jr., FedEx CFO. "We expect improved earnings, cash flows and returns this fiscal year and remain committed to improving operating income at the FedEx Express segment by $1.2 to $1.5 billion in fiscal 2020 versus fiscal 2017."
Like most transportation companies (ETF: IYT), FedEx has a good read on economic activity. Last quarter, the company forecasted US GDP growth of 2.9% this year and 2.7% in 2019. The company expects global GDP growth of 3.2% this year and 3.1% in 2019. Evidence that tariffs or trade uncertainty are having a negative impact would likely create some caution.
Managing the peak holiday season is key for the company as ecommerce continues to surge. Analysts are focused on margin expansion.
Analysts currently expect fiscal 2019 EPS up 13.6% with revenue up 8%. The company's annual EPS growth target is 10-15%.
FDX has a $68 bln market cap and trades at ~15x EPS estimates. With slightly better margins, UPS (UPS) has a $104 bln market cap and trades at ~17x calendar year 2018 EPS estimates.
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