What's Going On With FedEx Shares?

FedEx has helped kick off the Q3 earnings season, with its report reflecting one of the earlier that we still count in the overall Q3 tally. We still have a few weeks until the big banks unveil their quarterly results, really ushering in the period in a big way.

The reaction to the FedEx FDX report was notably negative, with the results spooking investors. Let's take a closer look at the release and compare the company's current standing to a prominent peer, United Parcel Service UPS.

FedEx Quarterly Results Disappoint

Concerning headline figures, FedEx fell short of the Zacks Consensus EPS estimate by 25%, with sales of $21.6 billion also 2% lower than expected. EPS fell 20% year-over-year, whereas sales were down a marginal 0.4% from the same period last year.

Below is a chart illustrating the company's sales on a quarterly basis.

Image Source: Zacks Investment Research

"Despite a challenging quarter, we remain focused on transforming our network, improving our efficiency, lowering our cost-to-serve, and enhancing our ability to adapt with speed to evolving market dynamics" said Raj Subramaniam, CEO.

He continued, "Overall, I remain confident in the value-creation opportunities ahead as we focus on reducing our structural cost, growing revenue profitably, and leveraging the insights from our vast collection of data as we continue to build the world's most flexible, efficient and intelligent network."

In addition, the company narrowed its FY25 earnings and sales outlook following the release, explaining the post-earnings share plunge. Sales expectations have been trending lower overall over the last year, with the $89.9 billion expected down 4% over the last year and suggesting 2.6% growth year-over-year.

Image Source: Zacks Investment Research

Earnings expectations have also been accordingly revised lower, with FDX forecasted to post 15% EPS growth relative to last year. The negative revisions trends certainly aren't constructive for the stock's performance, and investors would likely be better off waiting until the company sees positive earnings estimate revisions.

In addition, it's critical to note that the stock has regularly seen immense volatility following quarterly releases over the last two years, with the recent plunge no different. The arrows circled represent earnings releases.

Image Source: Zacks Investment Research

And while we have seen signs of moderation at the consumer level, the economy has overall proven to be resilient, with FDX's releases not a truly accurate gauge of what's to come for the economy. As mentioned above, sales expectations have been trending lower overall over the past year, not just a one-off recent development.

What About UPS?

United Parcel Service, the clear rival of FedEx, has also seen its earnings outlook take a negative turn over recent months. The stock has landed into a Zacks Rank #4 (Sell), which suggests further near-term share pressure.

Image Source: Zacks Investment Research

The company's next set of quarterly results are expected to hit the tape in mid-October, with sales expectations primarily staying stagnant. EPS revisions have been much more negative, with the $1.63 per share expected for the upcoming release down 20% over the last several months.

Image Source: Zacks Investment Research

The cloudy outlook paints a bearish picture for share performance, similar to FDX.

Bottom Line

With FedEx recently seeing its shares plunge following quarterly results, many have asked questions concerning the economy. And while we have seen signs of moderation at the consumer level, the economy has overall proven to be resilient, with FDX's releases not a truly accurate gauge of what's to come.

A peer, United Parcel Service, is also facing negative earnings estimate revisions, pushing it down into an unfavorable Zacks Rank #4 (Sell). Investors look to be better off waiting for a more constructive earnings outlook for both stocks, which would support bullish near-term share performance.

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