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FedEx Corporation (FDX - Analyst Report) is slated to release its fiscal first quarter 2013 results on Tuesday, September 18. The current Zacks Consensus Estimate for the fiscal first quarter earnings is pegged at $1.40 per share, representing an annualized growth of (3.9%).

Fourth-Quarter and Fiscal 2012 Flashback

FedEx reported fiscal fourth quarter adjusted earnings of $1.99 per share outpacing the Zacks Consensus Estimate of $1.92 and the year-ago earnings of $1.75 a share. The outperformance was attributable to strong yields, record holiday shipping and remarkable performance by FedEx Ground and improved FedEx Freight service offerings.

For the full year, the company reported adjusted earnings per share of $6.59, 34.5% higher than adjusted earnings of $4.90 in the year ago.

Total revenue in the quarter climbed 4% year over year to $11 billion but missed the Zacks Consensus Estimate of $11.2 billion. For fiscal 2012, total revenue increased 8.7% year over year to $42.7 billion. 

Agreement of Estimate Revisions

Estimates revisions for the first quarter and fiscal 2013 remained static over the last 7 and depict a downward movement over the last 30 days.

For the fiscal first quarter, none of the 18 analysts made any positive or negative estimate revision over the last 7 days. Over the last 30 days, no upward movement was registered but all the analysts moved downward.

Similarly, for fiscal 2013, none of the 22 analysts revised their estimates in last 7 days but in the last 30 days, 19 analysts made downward revisions, while no one moved upward.

For fiscal 2014, out of the 20 analysts, none made any positive or negative revision over the last 7 days. However, over the last 30 days, 2 analysts made positive revision while 14 analysts moved in the opposite direction.

We believe that given the global economic meltdown along with the debt crisis surrounding the Eurozone, analysts remain conservative over the company’s earnings expectation. Based on the same reasons, the company reduced its earnings guidance to the range of $1.37 to $1.43 per share from the previous expectation of $1.45 to $1.60 per diluted share in early September. The company also apprehends subdued revenue performance in the U.S. domestic package in fiscal 2013 due to volume declines.

Further, Express margins are expected to remain suppressed until demand rises in the international segment and costs improve in its domestic operations. Further, contract expiry in the U.S. Postal Service (USPS) that includes FedEx's domestic air transportation services for USPS’ First-Class, Priority and Express Mail, which would impact Express revenue as it contributes approximately $1 billion to annual revenues.

Magnitude of Estimate Revisions

For the first quarter of fiscal 2013, the magnitude of estimate revisions remained unchanged over the last 7 days at $1.40. However, it dropped 16 cents over the last 30 days from $1.56.

For fiscal 2013, the Zacks Consensus Estimate remained unchanged at $7.02 over the last 7 days but dropped from $7.29 in the last 30 days.

For fiscal 2014, the Zacks Consensus Estimate is pegged at $8.25, unchanged over the last seven days but down 23 cents over the last 30 days.

Earnings Surprises

With respect to earnings surprise, FedEx outperformed the Zacks Consensus Estimate over the last four quarters, with the average being 5.06%.

The current Zacks Consensus Estimate for the to-be reported quarter remains flat at 0.00%. For fiscal 2013 and 2014, the Zacks Consensus is skewed downside with 0.43% and 0.85% risk factor.

Our Recommendation

We believe FedEx is poised to benefit from improved pricing, volume growth, continued yield improvement and diminishing cost headwinds. These would lead to improved revenue, margins, earnings and cash flow in fiscal 2013. However, increased investments, competitive threats from industry giants like United Parcel Service (UPS - Analyst Report) and unionized workforce could limit the upside potential of the stock

We are currently reiterating our long-term Neutral recommendation on FedEx. The stock retains a Zacks #3 Rank (Hold) for the short term.

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