FedEx Stock Set to Deliver More Upside on Earnings (FDX)

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FedEx Corporation (FDX) is looking to keep its streak of Wall Street-beating earnings alive when it reports results early Wednesday, giving FedEx stock yet another lift in an already very strong year for FDX.

FedEx FDX FedEx stockFDX — the world’s largest air-cargo shipper and No. 2 package deliverer after United Parcel Service, Inc. (UPS) — has been flying high on a strengthening U.S. economy, price hikes and an effective program to cut costs.

About this time last year, FDX was getting clobbered by a decline in demand for higher-priced (and higher-margin) air shipping, especially from Asia. But expense reductions and other measures took hold, and now the worst looks to be safely behind the company.

FDX exceeded Wall Street analysts’ average estimates for sales and earnings in the last two quarters, and it’s a good bet that the company will do so again when it reports this week.

True, the economy of Japan weakened over the course of the most recent quarter — and Europe has hardly covered itself in economic glory either — but accelerating U.S. strength and lower fuel costs should more than offset those drags.

Indeed, the Street forecasts earnings per share to grow to $2.19 from $1.57 a year ago, according to a survey by Thomson Reuters. Revenue is projected to increase more than 5% to $11.98 billion.

FedEx Stock Ready for Market-Beating Returns

Whatever turbulence FDX hit at this time last year, it’s clear FedEx stock is well past the storm (and FDX is set up for some easy year-over-year comparisons.) FedEx stock has gained more than 22% for the year-to-date. The broader market — after a recent sputter — is up a bit more than 8% so far in 2014.

As the world’s largest air shipper, the market will no doubt be keen on FDX’s take on the state of the global economy, but don’t expect the company to say anything we don’t already know. Asia remains sluggish, Europe is flirting with recession and plunging oil prices — while great for lowering operating costs — create deflationary pressures that could cause further deceleration in the global economy.

But as for any impact from all that on FedEx stock, well … the market will probably shrug it off. Price hikes and a much greater emphasis on U.S. shipping — especially in the ground segment — should continue to help insulate FDX results from global weakness.

Besides, global economic risks look to be already discounted in the FedEx stock-price multiple. After all, FDX has a long-term growth forecast of 16% a year for the next five years of so, and yet the forward price-to-earnings multiple (P/E) is only 16%, too. Ordinarily, a stock’s forward P/E trades at a premium to its growth forecast.

The bottom line is that FDX’s quarterly results should continue to support the bull case on FedEx stock, which looks set to deliver even more market-beating returns.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/12/fedex-stock-fedex-corporation-fdx/.

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