Online Shopping Packages May Help FedEx Deliver for Investors -- Earnings Preview
December 19 2016 - 6:07PM
Dow Jones News
By Paul Ziobro
FedEx Corp. is scheduled to release its fiscal second-quarter
earnings after the market close Tuesday. Here's what you need to
know:
EARNINGS FORECAST: Analysts polled by Thomson Reuters expected
FedEx to earn $2.90 a share in the quarter, excluding certain costs
tied to its acquisition of TNT Express, compared with $2.58 a year
ago. In September, the company raised its full-year forecast,
predicting adjusted earnings of $11.85 to $12.35 for the year
ending May 2017.
REVENUE FORECAST: Analysts expect 2Q revenue of $14.91 billion,
compared with $12.45 billion a year earlier. The year-ago results
didn't include TNT Express, which FedEx bought in May.
WHAT TO WATCH:
E-COMMERCE: FedEx will shed light on how carriers are handling a
major surge in holiday volume as more people do their shopping
online. FedEx and rival United Parcel Service Inc. continue to see
the number of packages shipped during the holiday season rise at a
double-digit rate, putting pressure on them to handle the
additional load. While the extra packages bring more revenue, both
companies are investing heavily to handle the capacity. Last week,
Morgan Stanley analysts lowered their 2Q EPS forecast to $2.86,
saying e-commerce gains will be hurt by margin pressure on FedEx's
Ground business.
PRICING: FedEx executives have called on retailers to absorb
more of the costs associated with building out the delivery network
to support online orders. Already, FedEx is passing on more of the
costs, with a 3.9% increase on FedEx Express rates and 4.9%
increase on other shipping rates going into effect early next
year.
TRADE: FedEx shares surged above $200, hitting an all-time high
last week, as part of a postelection rally, even though Donald
Trump's victory raises questions over the future of U.S. trade
policy. FedEx chief Fred Smith, who met with Mr. Trump after his
victory, warned earlier this month that withdrawing from trade
agreements like Nafta would be "catastrophic" for the U.S.
economy.
FUEL PRICES: Much of the benefit from lower fuel prices has run
its course at FedEx. Lower jet fuel helps reduce costs for the
FedEx Express business but the company also pulls in less revenue
from fuel surcharges. Analysts at Citi expect just a 4c benefit to
2Q earnings from lower jet fuel prices, despite a 40% decrease in
U.S. Gulf prices over the last nine months. In the year-earlier
quarter, Citi estimates the fuel benefit was 11c a share.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
December 19, 2016 17:52 ET (22:52 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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