Shifty- you're sort of making my point. If the results are inferior to the previously announced projections by BOTH FDX and the analysts (and history suggests they will be), the future #'s are somewhat skewed and a downgraded EPS and therefore P/E ratio would result, no? UPS has already paid the price for peak while FDX has yet to do so. I'm simply saying their time will come next week and at the same CC, they'll have to discuss the weathers' impact on January and February. Beyond that, when they had previously projected their results, U.S. GDP was pegged at around a 3% growth. That's been downgraded significantly. So. I guess we'll see what the future holds on Thursday. Actually for me it may present an opportunity since I'm holding some April $95 covered calls I'd like to buy back if we hit a temporary dip in sympathy with FDX's report.
FDX had an 11% downside miss on last year's Q3 (Dec, Jan, Feb) earnings. That was without the havoc that this winter wrought. The latest expectation is for $1.52 - well up from last year's $1.23. What is curious is that one analyst has them pegged at $1.23 while another a lofty $1.72. I think CitiGroup has it right when they issued a lowered expectation several days ago. In my view, the fact that FDX hasn't done so puts them in a precarious position. Amazingly, they sit not far from their all-time high as no one seems particularly concerned about what they're about to report. Me? I'm baffled.....
Interesting that the only FDX "warning" comes from CitiGroup. How can it be that FDX would appear to prefer to simply announce a poor Dec/Jan/Feb quarter on the 19th without preparing the investment community for a lackluster report? Maybe they'll just make a bombastic going forward pitch? Seems strange to me.....
Nothing to do with management but simply to report the exceedingly difficult December of 2013 plus the weather-impacted months of January and February. Every other transport company has posted bleak numbers surrounding the end of fiscal 2013. There is absolutely no reason to think FDX somehow averted the issues that affected all the other players in the sector. Straight up, they're running short of time to warn and thereby run the risk of a severe downside reaction once they discuss the results.
there are so many holes in the FDX analyst expectations it's scary. First off, as we know they report their Q3 (December, January and February) on March 19th- just 3 weeks away. Just like UPS reported during our earnings call, FDX will have to discuss the disappointing peak season. They had problems in Memphis and Texas hubs just like we did. They had issues in urban/rural centers all over the country just like we did. The surprising thing in my mind is analysts not reacting to FDX's last Q3 report when projecting this years EPS prognostication. Last year they missed Q3 by a whopping $.13 while reporting $1.23. This year, despite the horrific weather and package overload, analysts are looking for $1.55. That # has only come down by $.02 in the last 90 days. So what I'm again saying is look for a profit warning in the near future just as UPS alerted the analyst community in advance.
If I recall correctly, during the earnings call management mentioned that the projected UPS effective tax rate for Q1 would be 35%. A report today mentioned that many large U.S. corporations pay very little in federal income tax over the last 5 years and many have paid zero at least once during that span. This is not a small sampling as it includes 288 of the largest corporations in America. So, it seems to me that the GOP plan that is being bantered about that might lead to a 25% tax rate for U.S. corporations would benefit us while hurting other companies who seem able to write off untold amounts of expenses. Thoughts?
Disappointed to say the least. I just hope management is astute enough to buyback shares at dips in the share price. Personally, I'm always leery of any company buying back shares in an effort to rise the EPS. Granted some are needed by treasury for options/bonuses etc. but I cringe in simply going on a buyback spree. I'd much rather they pursue immediately accretive acquisitions like the one announced earlier this week. So, is any one else super enthused by a nickle increase and about 2.7% as a new ratio? Oh- one more thought. Since so many present employees hold shares, I think a $.07 or so increase would have been a nice reward for struggling through some very, very difficult weather in the last few months. JMHO....
FDX has their next earnings CC on March 19th. It includes the months of December, January and February. So, they will have to admit to an overwhelmed peak season just like we did and follow that with a discussion about how the severe weather has been impacting operations. As a result, I expect shares of both FDX and UPS to decline with UPS dropping to the low $90's. That's actually temporary good news for those folks with $95 calls expiring in April. Again, it would seem logical for a 10%+ dividend announcement to come any day now.
It would be hard to imagine any company even remotely engaged in transit operations (with maybe an exception for the rails to some degree) not experiencing troublesome operations. It seems like as soon as headway is made in one part of the country, inclement weather strikes elsewhere or, in the case of Atlanta and the Carolinas, it returns in short order to wreak havoc a 2nd time. Undoubtedly, analysts and naysayers used to frown when they would here something like, "weather had a negative impact upon our profitability this past quarter." Well, when EVERYBODY experiences these issues and the impacts are on the TV, the web and driving conditions are treacherous, the situation is better understood. As poor as out quarter is probably destined to be, FDX is going to have a truly bad one. I'd be shocked if they don't warn in the next few weeks. The quarter they will be reporting on includes December and these last 2 very tough weather months. I'd also be fascinated to see how the airlines are doing. Just the cost of the de-icing is huge not to mention cancellations of business travelers which is strictly lost income. .
norjoa1- FDX will be reporting a double whammy. First though I wouldn't be surprised if they issued an earnings warning downgrade any day now for their Q3 (Dec, Jan, Feb). As we all know, FDX does not report their peak season like we do. Theirs is part of the upcoming earnings call. Yes, I agree with mljt that ALL transportation companies will be experiencing real service issues for at least January and February. Delays, inefficiencies and overtime have to be thru the roof. The thing is, when so many of the major urban centers are impacted, the weather is no longer viewed as an "excuse" but rather a reality. For comparative purposes, my mail delivery has been abysmal for weeks now. Wait until you see the airlines and retailers results. I just have my fingers crossed that a 10%+ dividend increase is still in the cards.
FWIW, just imagine if Amazon had exceeded analyst's expectations??!! As it was, JUST LIKE US THEY SCREWED UP THEIR PLANNING PERMITTING CUSTOMERS TO SHIP WAY TOO LATE IN THE SEASON WITH NO COMPELLING REASON TO ALERT THEIR DELIVERY COMPANIES IN A REASONABLE WAY. Now I feel better...
Guys- read the earnings call transcript and all your answers are there (hint- excessive equipment rental costs, overtime both during the week and weekends, refunds of guarantees, increased healthcare costs to name a few).
Excellent points. BTW, I got the feeling that the couple of times that the $5B or so "available cash on the books" reference was brought up it sounded VERY good for a substantial dividend increase. No planes are needed to add to our youngest in the industry fleet and share buyback allotment is slightly less than lest year. So, it portends 10% plus vs last year's 9% or so. Also, investors and analysts have to like the huge investments coming in hub facilities, technological advancements within the hubs to reduce intellectual requirement (training and memorization) meaning less investment in the classroom, knowing what is within trailers coming from bigger customers during peak and, of course the expanded and accelerated roll-out of Orion. I thought they handled the earnings call ideally and took full advantage of addressing that the difficulties of peak 2013 will spur much better outcomes for 2014. The turned a negative into a positive very effecttvely.
one of my first questions would be how do you project the really poor weather conditions in key metropolitan areas of the country will impact your Q1? Then I'd ask how much progress we've made in repairing our relationship with Amazon? Then I'd ask about the impact of the pension mark-to-market going forward? Then I'd ask about any cost savings program on the horizon and the impact, if any, at this juncture of Orion? At this point, I think I'd be in a decent position to read the tea leaves for Q1 and beyond.
A Motley Fool blurb on the extraordinary selling, general and administrative expense that rose so much last year hurting our margins was the mark-to-market pension adjustment of $48B. We should reap a bit of benefit from that ins this year's final #'s particularly since the market did so well. I'd like to think that volume wise we'll be fine in Q1 but the weather (I know, it happens every year) IS A CONCERN as we've not seen anything like this polar express for some time. Reality is reality. The airlines are getting killed.
A couple things come to mind. Just to get these thoughts off my chest first. The airlines are getting killed by weather issues. When it happens to UPS, all we hear is "I didn't get my package" critiques. I know that's only part of the larger story being Amazon shipments overwhelming the system. Well, Amazon is expected to beat expectations. So they sit back fat and happy (but giving some refund considerations to customers) after having given us such faulty volume projections that they almost single-handedly guaranteed a dismal UPS performance for peak season. OK- now I feel better. The analysts have lowered their EPS expectations for Q4 due to our guidance update. It now sits at $1.25 down from $1.43. Last year, analysts expected us to earn $1.38 and we came in at $1.32. So, clearly the peak season may drive full year revenue higher but that is not reflected in EPS. Here's a little prediction. We gave our earnings warning a few weeks ago no doubt in part to address the bad Amazon publicity but also the impact of weather, excessive equipment rental and more peak season staffing. I'm hoping that the few tailwinds that we had, better mark-to-market pension status and lower fuel costs, might offset some of the performance cost issues. I'm looking at $1.27 or so. The dividend growth should still be right around 10%. Thoughts??