FedEx Corporation (FDX) Stock Recovers After Q3 Miss

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FedEx Corporation (NYSE:FDX), the delivery company formerly known as Federal Express, laid an egg with fiscal third-quarter earnings reported after the market closed March 21. While the stock wasn’t clobbered in Tuesday’s broad-market downturn, it still ended up taking its licks … at least for a short while in after-hours trade. But after falling about 3%, it rebounded to as much as a 5% gain before settling in at 2% gains heading into Wednesday’s regular action.

FDX stock, Fedex

FedEx earned $562 million, $2.07 per share, on revenues of $15 billion. On an adjusted basis, profits came to $2.35 per share. The “whisper number” was for earnings of $2.68 per share on revenues of about $15 billion. So, FDX met expectations for revenue while failing badly on earnings.

Most analysts thought the  bar they set would be easy to clear, however, and two analysts covering FDX stock had moved to the buy side since the December report.

Ouch!

FedEx blamed rising fuel costs for the miss, the fact that the quarter was a day shorter than normal, and network expansion with FedEx Ground.

The company projected final fiscal 2017 earnings ranging from $10.80 per share to $11.30, however, because results for TNT Express, acquired earlier this year, will finally be folded in. Assuming the company hits those marks, its price to earnings ratio for all of 2017 would fall below 17, below the price of the average S&P stock. The initial reaction to the news, however, was negative, the stock falling over $7 per share.

Many analysts are worried about Amazon.com, Inc. (NASDAQ:AMZN) replacing FedEx for deliveries, and FedEx is investing heavily to make sure it can’t arbitrate it away. During the last quarter, it expanded next-day delivery to 4,400 new zip codes, for instance.

The bigger news was the reported profitability of TNT Express, the world’s fourth largest delivery player, which is expected to hit FedEx earnings in the fourth quarter and provide a significant boost on both the top and bottom lines. TNT’s leadership position in Europe should help the company keep those earnings going.

Another area of potential growth is Asia, where the company now offers tracking of packages in difficult markets like India. For FedEx bulls, this kind of news must be key to their view, FedEx getting into more markets, with faster deliveries, and eventually buying market share ahead of Amazon to keep growing.

Bottom Line on FDX Stock

The Trump threat to world trade growth should not be underestimated as analysts digest the latest earnings. A down market on March 21 did not take FedEx stock down with it, as the company lost just 0.22% of its value while the S&P 500 lost 1.24%.

And it looks like it will be spared the rod today.

Still, with two consecutive misses, FedEx stock should remain under pressure. That said, with the addition of TNT numbers to the next quarter, that may eventually turn it into a bargain.

Assuming it can meet its stated goals for the fourth quarter, with TNT, FDX stock will achieve a below-market price-to-earnings ratio for the first time in years, and that may bring the bargain hunters back.

Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he was long AMZN.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/fedex-corporation-fdx-stock-hammered-on-q3-miss/.

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