FedEx Corporation (NYSE:FDX) reported Tuesday after the close with above-consensus non-GAAP earnings per share and in-line revenue for the fiscal fourth quarter.

The Analyst

Bernstein analyst David Vernon maintained an Outperform rating on FedEx with a $296 price target.

The Thesis

FedEx's Q4 earnings outperformance was driven by a lower tax rate, Vernon said in a Wednesday note. The analyst termed the operating results as "solid," as adjusted EBIT was in line. (See Vernon's track record here.) 

Vernon expects the market to exclude most or all of the 49-cent tax credit that propped up FedEx's Q4 bottom line, therefore perceiving the result as missing expectations by 5 percent.

FedEx's segmental results were strong, with the Ground segment growing volume and yield by 6 percent and the Freight segment seeing 16-percent revenue growth, the analyst said. 

The strong operating performance was offset by a 75-percent increase in corporate center cost, Vernon said.

Bernstein views the guidance as mixed, with adjusted EPS guidance for fiscal 2019 of $17.30 at the midpoint, 4 percent below estimates. The revenue growth guidance was stronger than expected, Vernon said. 

FedEx's capex guidance was light, the analyst said. FedEx forecast a spike in capex at Express in 2020 and a moderation of capex in Ground. 

" ... We expect uncertainty on 2020 spend to weigh on the stock, limiting potential multiple expansion near-term," Vernon said. 

Bernstein projects that the consensus will move lower, in-line with the new guidance.

After stripping off the effect of a higher tax rate, the analyst said he expects FedEx's EBT per share to grow by 18-22 pecent for fiscal 2019, something that's not priced into the stock. 

The Price Action

FedEx shares have gained about 3.8 percent year-to-date.

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