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How Cyberattacks Crippled FedEx’s Fiscal 1Q18 Earnings

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How Cyberattacks Crippled FedEx’s Fiscal 1Q18 Earnings PART 1 OF 10

Why FedEx Missed Analysts’ Earnings Estimates in 1Q18

FedEx’s 1Q18 earnings

On September 19, 2017, Memphis-headquartered global logistics company FedEx (FDX) announced its fiscal 1Q18 results. FDX reported EPS (earnings per share) of $2.2, but Reuters-surveyed analysts had expected earnings of $3.0 per share. On a YoY (year-over-year) basis, FedEx’s earnings fell 17.4% from $2.65 per share in fiscal 1Q17.

Excluding non-recurring items, FedEx reported adjusted earnings of $2.51 per share, but the Reuters-surveyed analyst estimate had been $3.09 per share. FDX thus missed the analysts’ adjusted earnings estimate by ~19%.

Why FedEx Missed Analysts’ Earnings Estimates in 1Q18

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In our FedEx’s pre-earnings series on September 14, 2017, we discussed why the company could miss the analysts’ estimates. Hurricane Harvey and cyberattacks on TNT Express’s IT (information technology) systems pulled down the company’s 1Q18 results, and it appears that the FDX-TNT integration will be impacted.

FedEx has maintained that without these events, it would have reported earnings of $3.32 per share, which raises doubts as to whether Wall Street analysts had taken these events into account in their estimates. After its fiscal 1Q18 earnings release, the global parcel delivery giant promptly revised its fiscal 1Q18 earnings guidance to $11.05–$11.85 per share, down from the previous estimate of $12.45–$13.25 per share.

FedEx stock price reaction

The results of global logistics companies like FedEx and United Parcel Service (UPS) are often linked to the performance of the US economy. On September 19, 2017, FedEx stock rose marginally, but then fell 1.4% in after-hours trading to $213.0 per share. The next day, the stock rose 2.1%. UPS dropped 0.5% on the same day to ~$117.0 per share. Let’s check how other less-than-truckload stocks reacted on the same day.

UPS dropped 0.5% on the same day to ~$117.0 per share, compared with the following results from other less-than-truckload stocks the same day:

  • Old Dominion Freight Line (ODFL): ~1% rise
  • XPO Logistics (XPO): 0.3% rise
  • SAIA (SAIA): 0.2% fall
  • YRC Worldwide (YRCW): 2.1% rise

On the same day, the SPDR S&P Transportation ETF (XTN) fell 0.2%.

Keep reading this series (below) for a closer look at FDX’s fiscal 1Q18 segmental results and a review of its operating margins and valuation.

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