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FedEx’s Q2 2019 Earnings Are Likely to See Double-Digit Growth


Dec. 13 2018, Updated 9:53 a.m. ET

Second-quarter expectations

FedEx Corporation (FDX) is scheduled to report its fiscal 2019 second-quarter results on December 18. The courier and package delivery company has a mixed earnings surprise history, as it’s had a similar amount of hits and misses in the trailing eight quarters.

However, it looks very probable that the company will continue its trend of reporting double-digit quarterly earnings growth in the quarter. It’s registered double-digit earnings growth in each of the last four quarters.

For the second quarter, Wall Street analysts are projecting adjusted EPS of $3.96 for FedEx, implying a YoY (year-over-year) rise of 24.5%. Furthermore, analysts expect its revenue to rise 8.9% on a YoY basis to $17.8 billion.

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Factors to consider

Analysts believe that FedEx’s second-quarter results are likely to continue benefiting from its extensive delivery network and rising e-commerce sales. The company’s broad international presence and fast and secure delivery services give it the competitive edge over large competitors such as United Parcel Service (UPS) and XPO Logistics (XPO) as well as regional and local players such as Saia (SAIA).

As of August 31, the company had operations in 220 countries wherein it covered over 650 airports and 2,150 railway stations. Also, the company owns over 675 aircraft and 85,000 motorized vehicles, which help it in making fast and timely deliveries.

Furthermore, the robust growth of e-commerce is expected to boost the company’s top and bottom lines in the quarter. As per eMarketer estimates, its global online retail sales are expected to jump 21.6% in 2018 to $2.86 trillion from $2.35 trillion in 2017, thereby increasing the contribution of online retail sales to its total global retail sales by 150 basis points to 11.5%.

Additionally, the company’s second-quarter bottom line result is expected to benefit from a lower tax rate. Analysts anticipate the tax rate for the quarter to come in at 25.1%, substantially lower than the fiscal 2018 second-quarter rate of 32%.

Nonetheless, higher costs due to increased investments in facility upgrades and TNT Express’s integration-related expenses may somewhat offset the benefits of the factors mentioned above in the company’s fiscal 2019 second-quarter bottom line results.

Investors can get exposure in FedEx by investing in the Industrial Select Sector SPDR ETF (XLI), which holds ~2.5% in the stock.


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