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FedEx Corporation (FDX) Stock Is Under Pressure Ahead of Q3 Earnings

FDX stock is priced like Alphabet, but it doesn't have nearly the same upside. That's a problem.

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“To whom much is given, much will be required.” Bible quotes aside, FedEx Corporation (NYSE:FDX) has been given a fat price to earnings multiple of 28.4 by the market. This means analysts covering FDX stock require the company to beat their estimates of at least $2.64 per share in profits when the company reports earnings after the bell Tuesday, March 21.

The “whisper number” is for earnings of $2.68 per share, on revenues of about $15 billion. Given FedEx’s recent post-earnings volatility, that may be the real target.

While FDX stock has gained almost 19% in value over the last year, the reaction to its last earnings report in December — net income of $700 million or $2.59 per share of earnings on revenue of $14.93 billion — was decidedly negative. Estimates for this quarter are not much better.

Meanwhile, FedEx shares have been scrambling to reach their pre-earnings high since December, and had just gotten there when trading opened March 20.

The lesson should be clear: Beat the number, preferably by a lot, or pay the price.

Unquiet Slumbers

Most analysts think FedEx can do just that, with a majority having it on their buy lists and two moving there just since the last earnings report.

But while most analysts are sanguine, a growing minority are worried. It’s not just that the comparison with United Parcel Service, Inc. (NYSE:UPS) may no longer be so rosy.

It is the looming threat of, Inc. (NASDAQ:AMZN) that has the analysts worried. The online retailer is building out its own delivery services, with trucks, planes and even an airport lease near Cincinnati that let it, at minimum, further arbitrage FedEx’ pricing and, at most, replace it.

The online giant is already replacing FedEx through its Prime Now service — a same-day delivery option in selected markets that now includes food from restaurants, and in some locations, alcohol.

Same-day and fresh offerings are things FedEx can’t match. The real fear is that Amazon may, on its own schedule, delete FedEx entirely. Both FedEx and rival UPS, as well as the U.S. Postal Service, have become dependent on Amazon in recent years — postal service employees will even rush out with Amazon packages on Sundays — so Amazon’s growth in deliveries needs to be taken as seriously as a heart attack.

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Article printed from InvestorPlace Media,

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