FedEx Surges Despite ‘Uncertain’ Guidance

FedEx Corp. (NYSE: FDX) reported fiscal third-quarter financial results after markets closed Tuesday. The firm said that it had $1.41 in earnings per share (EPS) and $17.5 billion in revenue, compared with consensus estimates that called for $1.43 in EPS and $16.9 billion in revenue. The same period from last year had $3.03 in EPS and $17.0 billion in revenue.

Overall, operating results declined due to weaker global economic conditions including the impact of the coronavirus, higher self-insurance accruals, an unfavorable variable incentive compensation comparison, increased FedEx Ground costs from expanded service offerings, the loss of business from a large customer (Amazon), a continuing mix shift to lower-yielding services and a more competitive pricing environment.

Note that those factors were partially offset by the benefits from volume growth at FedEx Ground, an additional operating weekday, increased yields at FedEx Freight and the shifting of Cyber Week into December.

FedEx made an important note in the report that it would be suspending its 2020 outlook due to COVID-19 uncertainty.

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In the fiscal second quarter, FedEx updated its guidance for the fiscal 2020 full year. The company previously said that it expects to see EPS in the range of $10.25 to $11.50. The consensus estimates are currently $10.41 in EPS and $68.74 billion in revenue for the fiscal year.

Frederick W. Smith, FedEx board chair and CEO, commented on guidance and the pandemic:

The COVID-19 pandemic is having a significant impact around the world. We continue to deliver for our customers and are ready to support increased demand for our International Express export services due to the significant reductions in intercontinental air capacity. While the global economic impact from recent social-distancing mandates is uncertain, we remain well positioned to assist our customers as they work to manage their supply chains and inventories. We will continue to support efforts to combat the pandemic.

Shares of FedEx closed Tuesday at $95.16, with a 52-week range of $88.69 to $199.32. The consensus analyst price target is $168.60. Following the announcement, the stock was up about 2% at $97.01 in the after-hours session.

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