FedEx (NYSE:FDX) is scheduled to release its earnings for the fiscal third quarter on March 21. 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 half of the current fiscal year in which its revenues increased by 20%, we expect the company to have a solid Q3 driven by heavy demand for its services during the holiday season.
The table below shows consensus expectations for the company in the quarter ended February. The company is expected to report revenues of nearly $15 billion, which would signify 18% growth on a year-over-year basis, and non-GAAP earnings per share of $2.71, which would be a jump of 8% over the same period last year.
Despite the continued uncertainty in many major economies, growth in the e-commerce sector is expected to drive top line growth for FedEx. The Express segment, bolstered by the integration of TNT Express, and the Ground segment, which added GENCO to its offerings, are the primary revenue drivers for the company and are expected to show year-on-year (y-o-y) growth due to the holiday season. The company has taken host of measures – such as expanding its ground network, adding 50,000 to its workforce and automating many of the existing stations, to ensure smooth operations during the holiday season. These measures, along with the secular trend towards online shopping, should provide a boost to the company’s top line.
Last year, FedEx announced an increase in its shipping rates for all its offerings. The increased shipping rates, effective January 2, should also bolster the company’s revenues in the third quarter. At the same time, increased fuel prices, TNT integration costs, weakness in the manufacturing sector and employee compensation benefits are likely to adversely impact the company’s upcoming results.