By Laura Stevens
FedEx Corp. (FDX) is scheduled to announce its second-quarter
earnings before the market opens Wednesday. Here's what you need to
know:
EARNINGS FORECAST: Net income of $2.20 a share is the consensus
of analysts surveyed by Thomson Reuters, compared with $1.57
reported a year earlier. The company hasn't provided guidance for
the second quarter, but in September FedEx said it expects
per-share earnings to rise between 26% and 33% for the year to
between $8.50 and $9.
REVENUE FORECAST: Revenue of $11.98 billion is forecast,
compared with $11.4 billion reported the year earlier.
WHAT TO WATCH:
-PEAK SEASON: The holiday shipping rush is in full swing, and
FedEx will be the first company to report on how it is shaping up.
While its quarter ends in November, last year CEO Fred Smith
signaled shipping volume exceeded expectations in December and
pushed the company's peak day later than expected. One good piece
of news: Weather so far has cooperated. "If you have clear weather,
then I think they should be in a position to really benefit," says
Jack Atkins, an analyst with Stephens Inc.
-AIR FREIGHT: Overall air-freight numbers in recent weeks have
been strong, and analysts are expecting at least some of this to
translate to FedEx's bottom line. Some of that strength is due to
ongoing congestion at West Coast ports, says Kevin Sterling, an
analyst with BB&T Capital, driving more shipments to the air.
And as jet fuel prices fall, so do the attached fuel surcharges,
something that makes shipping via air more affordable and drives
volume.
-LOWER FUEL PRICES: Fuel prices again fell during the quarter.
The cost of oil is an important factor for a transportation company
with more than 600 aircraft serving nearly 400 airports world-wide,
plus more than 90,000 vehicles out on the road. FedEx's jet fuel
price fell to $3.078 a gallon in its quarter ending Aug. 31,
compared with $3.125 a gallon in the previous quarter. This type of
continued tail wind could add several cents to earnings per share,
analysts said.
-EXPRESS RESTRUCTURING: FedEx's restructuring of its air-express
division is expected to continue to pay off this quarter. In its
first quarter, profits rose 24% to $606 million, or $2.10 a share,
something the company largely attributed to reducing costs in its
express division more quickly than expected. The restructuring
measures undertaken include modernizing its air fleet to improve
fuel efficiency and offering buyouts to about 3,600 employees, who
have since left the company.
-GUIDANCE INCREASE: If earnings come out as rosy as
expected--and especially if they beat an already optimistic
consensus--analysts predict FedEx could raise its full-year
guidance.
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