FedEx Corporation: The FDX Stock Bull Case Just Got a Booster Shot

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FedEx Corporation (NYSE:FDX) FDX stock

FedEx Corporation (NYSE:FDX) beat Wall Street’s profit forecast for its fiscal first quarter and lifted its full-year outlook after Tuesday’s closing bell. And that sweet news only bolsters the bull case for FDX stock going forward.

For the three months ended Aug. 31, FedEx earnings came to $715 million, or $2.65 a share, up from $692 million, or $2.42 a share, in the same quarter a year ago. After stripping out charges and costs related to the TNT integration and a long-standing restructuring plan, earnings were $2.90 per share of FDX stock. On that basis, the bottom line exceeded analysts’ average exceptions by 9 cents a share, according to a poll by Thomson Reuters.

Revenue increased to $14.7 billion from $12.3 billion a year ago. Wall Street was looking for the top line to hit $14.61 billion.

Most importantly for anyone holding FDX stock, the company lifted its fiscal 2017 outlook by 10 cents a share. On an adjusted basis, FedEx now sees earnings per share of $11.85 to $12.35. Analysts currently peg full-year EPS at $11.97.

The earnings report also put to rest one of the market’s greatest concerns about operations at FDX. Heavy investment in the global shipper’s ground business played havoc with margins last quarter.

Not so this time around.

FDX Stock Has More Upside Ahead

FedEx enjoyed margin expansion in both the express and ground segments, helped by increases in volume. The effects were most noticeable in the ground business, where the explosion in e-commerce led to a 10% rise in volume.

In addition to margins, investors were pleased to hear that the integration of TNT Express continues apace. Bringing the Dutch shipping company into the fold is expected to cost $700 million to $800 million over the next four year. However, TNT should be accretive to FDX earnings by 2018.

As for the end-of-the-year shipping rush, FDX is predicting another record holiday season thanks to the growth of e-commerce. Delivery companies like FDX and United Parcel Service, Inc. (NYSE:UPS) have had some difficulties in predicting appropriate seasonal staffing levels over the last few years.

Perhaps that’s why FedEx said it will hire 50,000 seasonal workers this year, down from 55,000 a year ago.

Be that as it may, FDX still sees a holiday season for the record books thanks to the spread of e-commerce.

“We expect each of the four Mondays during the upcoming peak period to be among the busiest in our corporate history,” said Michael Glenn, head of market development, said on a conference call with analysts.

As we’ve noted before, thanks to the Brexit and other issues, the macro picture continues to be a concern for investors — but then, that’s old news. The restructuring, TNT integration and expansion of ground services are so far working in FedEx’s favor.

As long as it keeps delivering on those fronts, FDX stock — up 9% year-to-date — should continue to outpace the broader market.

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


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/fedex-corporation-fdx-stock-q1-earnings/.

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