What To Expect From FedEx’s Earnings

by Trefis Team
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FedEx (NYSE:FDX) is scheduled to release its earnings for the second quarter on December 20th after the markets close. Following a successful fiscal 2016 (year ends May), in which the company crossed $50 billion in revenue for the first time, and a strong first quarter of the current fiscal year in which it reported revenues of $14.6 billion, we expect the company to grow in this quarter driven by heavy demand for its services during the holiday season.

See our complete analysis of FedEx here

The table below shows consensus expectations for the company in the quarter ended November 30th. The company is expected to report revenues of $14.9 billion, which would signify 20% growth on a year-over-year basis, and non-GAAP earnings per share of $2.89, which would signify a jump of 12% over the same period last year.

Screen Shot 2016-12-16 at 13.47.34

Holiday Season To Drive Growth

The fiscal second quarter is the busiest quarter for the shipping giant. This year, FedEx expects 10% more packages than the 325 million packages it delivered last year. [1] In order to serve the increased demand, the company has made some changes in its structure. The company invested $2 billion to improve FedEx Ground’s network and has added 19 automated stations in the current year, which should help it cater to the increased demand. Additionally, it added more than 50,000 seasonal employees to its workforce. The company expects that these measures will help it get through the demands of the holiday season.

The continued growth in the e-commerce sector is expected to drive top line growth for FedEx. [2] The boom in the e-commerce sector – driven by the change in consumer behavior as many people now prefer to shop online – is the primary reason for the surge in holiday season demand. The Express segment, bolstered by the integration of TNT Express, is also expected to show revenue growth in the current quarter.

Persistent low fuel prices will impact both the top and bottom line for the company. Despite lower fuel surcharge revenue, FedEx’s operating profits are likely to be boosted by the reduction in fuel expenses, which contribute a significant portion of the company’s operating expenses.


 

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Notes:
  1. FedEx Expanded Its Network For Busiest Holiday Season, Daily News, December 3rd 2016 []
  2. Global Retail E-commerce Keeps on Clicking, AT Kearney Report, 2015 []
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