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Should You Buy FedEx (FDX) Stock Ahead of Q1 Earnings?

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Shares of FedEx (FDX - Free Report) have surged over 4% in the last month in a sign that investors might expect big things from the shipping powerhouse’s fiscal first quarter financial results. So, let’s see what they should really expect to see if they should consider buying FedEx stock ahead of Monday afternoon’s earnings release.

Overview

There has been talk that Amazon’s (AMZN - Free Report) pursuit of mass scale, end-to-end delivery would be the end of FedEx and United Parcel Service (UPS - Free Report) . The e-commerce giant isn’t there yet, and FedEx appears to be doing just fine as those fears were always overblown.

In fact, FedEx saw its adjusted fourth-quarter earnings soar from $4.19 to $5.91 per share, which also topped our Zacks Consensus Estimate. Meanwhile, the firm’s full-year revenues jumped over 8.5% to $65.5 billion. FedEx is also in the process of revamping its operations, which includes combining TNT Express with FedEx Express, slowly purchasing new Boeing (BA - Free Report) aircraft, among other initiatives.

Shares of FDX have climbed over 65% in the last three years, which outpaces the S&P 500’s 46% climb and crushes its industry’s 16% jump. FedEx stock has surged nearly 60% over the past 24 months as well. But investors will see that FDX has cooled off recently.

 

Valuation

Moving on, FedEx stock is currently trading at 14X forward 12-month Zacks Consensus EPS estimates, which marks a slight premium compared to its industry’s 11.6X average. FDX is currently trading well below the S&P’s 17.4X, its year-long high of 18.7X, and its one-year median of 14.8X.

Plus, if we look back over the last five years, we can see that FDX’s valuation picture is hardly stretched at the moment.

 

Outlook

Our current Zacks Consensus Estimate is calling for FedEx to post fiscal first quarter revenues of $16.88 billion, which would mark a 10.35% jump from the year-ago period. More impressively, FedEx’s adjusted Q1 earnings are projected to skyrocket 50.6% to reach $3.78 per share.           

Investors should note that FedEx has seen its first-quarter EPS projection sink by $0.07 over the last 90 days. With that said, FDX’s adjusted earnings projection has jumped by $0.01 in the last seven days.

Plus, FDX’s Most Accurate Estimate—the representation of the most recent analyst sentiment—is calling earnings of $3.79 per share, which is one cent better than our current consensus. FedEx has also topped our quarterly earnings estimate in the trailing three quarters. This, however, has not always helped its stock price climb in the immediate aftermath of an earnings release.

FedEx is currently a Zacks Rank #3 (Hold) and sports “A” grades for both Growth and Momentum and a “B” for Value in our Style Scores system. With that said, investors might want to think about buying FDX stock before the company reports its quarterly earnings results.

FedEx is scheduled to release its Q1 fiscal 2019 financial results after the bell on Monday, September 17.

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