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FedEx Q4 Earnings Preview: EPS Beat in Store?

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During the first quarter of 2022, we witnessed many companies’ shares undergo deep valuation slashes following quarterly releases. Supply chain issues, surging energy prices, and geopolitical issues have been a few of the impactful driving forces behind the less-than-ideal market reactions.

As we approach Q2, many of these issues still persist – undoubtedly painting a cloudy forecast for many companies’ quarterly results yet again.

Nonetheless, the market rolls on, giving investors little chance to breathe. Luckily for market participants, there is still a fair number of companies reporting quarterly results weekly.

One such company slated to release its Q4 results on Thursday after the bell rings is the leader in global express delivery services, FedEx FDX.

Overview

FedEx provides an extensive portfolio of transportation, e-commerce, and business services through companies competing collectively, operating independently, and managed collaboratively under the FedEx brand. Let’s examine how the company shapes up heading into the quarterly release.

Year-to-date, FDX shares have declined approximately 11%, a much better performance than the S&P 500’s 23% decline. In the sea of red that has been 2022, the relatively strong share performance bodes well for the state of the company.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition to a higher level of defense within shares, the company also sports an Earnings ESP Score of 0.52% heading into the earnings release and is currently a Zacks Rank #2 (Buy). It’s worth noting that pairing a positive Earnings ESP Score with a Zacks Rank #3 (Hold) or higher vastly increases the odds of an EPS beat. In addition to a very favorable Zacks Rank, the company also sports an overall VGM Score of an A.

In a move that shocked the market, FedEx announced just last week that it’d be increasing its annual dividend by a substantial 53% to $1.15 a share – undoubtedly a shareholder-friendly move that investors can celebrate. Additionally, shares exploded for a 15% gain following the announcement in last Tuesday’s training session.

FedEx vs. United Parcel Service

The dividend hike comes at a crucial time – FDX has struggled to remain on pace with its peers, such as United Parcel Service UPS. The chart below illustrates the performance of both companies’ shares over the last year while blending in the S&P 500 as a benchmark.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Regarding the relatively poor share performance compared to UPS over the last year, FedEx has been tied up in a so-far unfavorable acquisition.

Flipping the pages back a few years, FedEx acquired TNT Express in May 2016 in a deal valued at $4.8 billion. The acquisition was expected to spur growth across Europe, but the company’s integration has been complicated for FedEx and has cost them millions. This has been a significant driver behind the poor share performance over the last year.

Quarterly Estimates & Previous Earnings

For the quarterly report coming in hot on Thursday, the Zacks Consensus EPS Estimate resides at $6.91, reflecting a sizable 38% growth in earnings from the year-ago quarter. Additionally, two analysts have upped their earnings outlook over the last 60 days with a 100% revision agreement percentage, boosting the Consensus Estimate Trend by a respectable 1.6%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Pivoting to revenue projections, the company is forecasted to rake in a mighty $24.3 billion in revenue for the quarter, displaying a substantial 7.6% expansion in the top line from year-ago quarterly sales of $22.6 billion.

Bottom-line results have been primarily mixed over its last ten quarterly reports, exceeding EPS estimates five times and reporting earnings under expectations five times. Simply put, this has been a reflection of the profound costs incurred within its previous acquisition.

Bottom Line

All in all, things are shaping up favorably for FDX heading into its quarterly release. Additionally, the dividend hike is a great sign for investors – an increasing dividend displays that the company is increasingly committed to rewarding investors.

Its positive Earnings ESP Score paired with its favorable Zacks Rank #2 (Buy) is undoubtedly a positive as well, as the odds shift significantly in favor of a quarterly EPS beat.

The company undoubtedly hopes to break out and report strong bottom-line results, which it has struggled to do consistently.


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