FedEx Corp FDX could provide a look at how shipping demand is shaping up and ease analysts’ concerns about the macro environment when the company reports first-quarter financial results after market close Thursday.
Earnings Estimates: Analysts expect FedEx to report first-quarter revenue of $21.96 billion, according to estimates from Benzinga Pro.
The company reported revenue of $21.7 billion in last year's first quarter. FedEx has beaten analysts’ estimates for revenue in one straight quarter and only two of the past 10 quarters.
Analysts expect the company to report first-quarter earnings per share of $4.80, up from $4.55 in last year's first quarter. The company has beaten analysts’ estimates for earnings per share in two straight quarters and seven of the past 10 quarters.
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What Analysts Are Saying: Seasonal pressure and macro softness could show through in FedEx's first-quarter results, Bank of America analyst Ken Hoexter said.
The analyst reiterated a Buy rating and lowered the price target from $347 to $345.
"We remain focused on FedEx's plan to generate $2.2 billion in structural DRIVE cost savings in F2025, and $2 billion in savings from Network 2.0 between F25-F27," Hoexter said.
The analyst expected the Federal Express segment, which accounted for around 85% of revenue, to have a "slight" year-over-year volume improvement. The improvement would come ahead of a USPS contract loss on Oct. 1.
A price target of $345 is based on 17x fiscal 2025 earnings per share estimates from the analyst and came in higher than the midpoint of a historical 12x-18x range for FedEx shares based on a price-to-earnings multiple, the analyst said.
"We see momentum in structural cost takeout and potential value unlock from is a strategic review of FedEx Freight (additional details on a potential spin out could boost valuation further)."
Goldman Sachs recently reiterated a Buy rating on FedEx ahead of the earnings report with upside leverage despite the macro concerns.
"We remain Buy rated on FDX on cost takeout initiatives via DRIVE and Network 2.0, with strong operational leverage and earnings power once the market turns," analyst Jordan Alliger said.
The analyst said FedEx can show earnings power "once the market turns," but cautions investors ahead of the earnings report.
"We think it prudent to be somewhat more cautious on FDX's FY1Q EPS."
The analyst has a price target of $332 on FedEx stock and a sum-of-the-parts valuation of $395.
"We think LTLs (FedEx Freight) is likely not fully captured in FDXs share price and valuation," said Alliger.
The sum-of-the-parts valuation was up from a previous target of $370 from the analyst earlier this year.
Key Items to Watch: The first quarter of the fiscal year could prove a pivotal one for FedEx as it comes ahead of a USPS contract end and the busy holiday shipping time.
With concerns for demand and the macro environment, FedEx could provide clues on how the shipping industry is looking in the future.
"We made significant progress in fiscal 2024 and ended the year strong, delivering four consecutive quarters of expanding operating income and margin in a challenging revenue environment," FedEx CEO Raj Subramaniam said after fourth-quarter results.
Cost savings and their impact on operating income and margins could be a bright spot again for the company.
The potential catalyst to watch continues to be the strategic review of FedEx Freight, which could include a spin-off or sale that could unlock shareholder value.
FDX Price Action: FedEx shares trade at $297.09 on Wednesday versus a 52-week trading range of $224.69 to $313.84. FedEx shares are up 18% year-to-date in 2024.
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