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The Zacks Analyst Blog Highlights: FedEx, American Airlines, Allegiant and United Parcel

Zacks Equity Research
Zacks.com featured highlights include: Lululemon, Sirius, Kohl's and Olympic Steel

For Immediate Release

Chicago, IL – March 19, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include FedEx Corporation FDX, American Airlines Group Inc. AAL, Allegiant Travel Company ALGT and United Parcel Service, Inc. UPS.

Here are highlights from Friday’s Analyst Blog:

Is a Q3 Earnings Beat in the Cards for FedEx (FDX)?

FedEx Corporation is set to release third-quarter fiscal 2018 results, after the closing bell on Mar 20.

Last quarter, the company posted a positive earnings surprise of 10.8%. It reported better-than-expected results owing to increased package volumes during the peak holiday season. Both the top as well as the bottom line increased 9.3% and 13.6%, respectively, in the second quarter.

Let’s see how things are shape up for this announcement.
Why a Likely Positive Surprise?

Our proven model shows that FedEx is likely to beat on earnings this quarter because it has the perfect combination of the following two key ingredients:

Zacks ESP: FedEx has an Earnings ESP of +2.20%, representing the percentage difference between the Most Accurate estimate of $3.13 per share and the Zacks Consensus Estimate, pegged lower at $3.06. A favourable Zacks ESP is indicative of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: FedEx carries a Zacks Rank #3 (Hold). Note that the stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating estimates. Together with a positive ESP, the combination makes us reasonably confident of an earnings beat.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

What's Driving Better-Than-Expected Earnings?

Strong growth of e-commerce is likely to boost results in the third quarter. The Zacks Consensus Estimate for revenues at the FedEx Express (including TNT Express) division stands at $9,127 million, much above the year-ago reported figure of $6,779 million. For Ground and Freight revenues, the consensus mark is pegged at $5,170 million and $1,612 million, respectively, greater than the year-ago figures of $4,688 million and $1,492 million.

The new tax law, which reduces corporate tax rate significantly, is a huge positive for transportation stocks and FedEx is no exception. With decreased corporate taxes, the company’s bottom line is likely to get a boost in the to-be-reported quarter.

Additionally, the company has hiked shipping rates since January 2018. Notably, FedEx Express, Ground, Freight and Home Delivery shipping rates in the United States have been increased by an average of 4.9%. This move is in turn anticipated to aid the company’s top line in the period to be reported.

However, high costs are likely to hurt the company’s bottom line in the third quarter. Significant investments at the company's Ground unit have been pushing up costs. Moreover, the company’s high debt-levels are a cause for worry.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider the following stocks, which have the right combination of elements to deliver an earnings beat in the upcoming releases:

American Airlines Group Inc. has an Earnings ESP of +17.50% and a Zacks Rank #2.

Allegiant Travel Company has an Earnings ESP of +3.11% and a Zacks Rank of 3.

United Parcel Service, Inc. is also a #3 Ranked player and has an Earnings ESP of +1.45%.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Allegiant Travel Company (ALGT) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
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