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FedEx’s Q3 2019 Earnings Are Likely to Fall YoY

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Q3 earnings expectations

FedEx (FDX) is slated to report its fiscal 2019 third-quarter results on March 19. The courier and package delivery company has a mixed earnings surprise history, as it has surpassed analysts’ expectations in five out of eight trailing quarters and missed expectations three times. Additionally, the company reported double-digit earnings growth in each of the last four quarters.

However, analysts are expecting the company to report a YoY decline for the to-be-reported quarter. For the third quarter, Wall Street analysts are projecting adjusted EPS of $3.17 for FedEx, implying a YoY decline of 14.8%.

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Factors at play

Analysts expect FedEx’s revenue growth to slow down in the third quarter on concerns over the slowing global economy. They anticipate the company’s sales to rise 7% on a YoY basis to $17.7 billion. The growth rate is significantly lower than the over 9% growth it has reported in the previous five quarters.

During FedEx’s second-quarter earnings release, the company’s CFO, Alan Graf, said, “Global trade has slowed in recent months and leading indicators point to ongoing deceleration in global trade near-term.” He noted that weakness in the Chinese economy due to trade disputes, protests in France, Brexit uncertainty, and contraction in Germany’s GDP is hurting the company’s international business.

Going forward, analysts believe higher costs due to increased investments in facility upgrades and TNT Express’s integration-related expenses could weigh on FedEx’s third-quarter bottom-line results. Additionally, the company’s earlier announcement of voluntary buyouts of US-based employees is also likely to increase its third-quarter pre-tax expenses.

Peers’ expectations

Most of FedEx’s peers (IYT) plan to report their fourth-quarter results in April. Analysts’ fourth-quarter revenue expectations for UPS (UPS), Old Dominion Freight Lines (ODFL), and XPO Logistics (XPO) project YoY growth of 5.4%, 15.2%, and 4.6%, respectively. The earnings estimates for UPS, Old Dominion Freight Lines, and XPO Logistics project a YoY increase of 16.2%, 63.9%, and 60%, respectively.

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